Switching cash savings accounts should become quicker and easier under proposals announced by the Financial Conduct Authority (FCA).
The FCA is to introduce a series of new rules that will force firms to provide clear information on the interest rates on their cash savings products as well as clearly alerting consumers to changes in interest rates or the end of an introductory rate for example.
The FCA is also working with industry to deliver seven day switching for the vast majority of cash ISA transfers from January 2017.
The measures are in response to the FCA’s market study into competition in the cash savings market. This was the second market study under its new competition mandate which found that, for many consumers, competition in the £700bn sector was not working as effectively as it could do.
Christopher Woolard, director of strategy and competition at the FCA, said: “In a good market, providers should be competing to offer the best possible deal. Consumers should expect the information they need to shop around to be clear and easy to understand. When they wish to move accounts, they should be able to do so with the minimum of fuss.
“Our package of measures are all about giving consumers the information they need to make an informed decision about what to do with their savings, and the ability to act on it quickly.”
Measures include:
Removing complex jargon and helping customers understand their options. Firms to provide consumers with easy-to-understand key information to help them compare savings accounts. The design and content of these proposed summary boxes have been informed by independent consumer research.
Being clear on what interest consumers are getting. Firms to make interest rate information more easily accessible, including alerting consumers more actively to changes in interest rates, the expiry of a bonus rate or maturity of a fixed-term account, for example by text message.
Quicker and easier switching. Introducing a new rule that requires firms to provide a prompt and efficient service so that a customer can switch to a better account offered by the same firm. Firms should seek to make use of the identity information and documents they already hold about existing customers and may wish to provide simple switching processes for customers using online or mobile banking.
Seven day switching for cash ISAs. The FCA is working with industry to deliver seven day switching for the vast majority of cash ISA transfers (except for those involving the very smallest providers) from January 2017.
Making it clear which firms pay the lowest rates. The FCA will publish information in order to highlight firms who pay poor interest rates to longstanding customers.
The FCA is seeking feedback on these proposals and is expected to confirm finalised rules later this year. They intend for the rules to come into force in 2016.
Nationwide
Commenting on the FCA’s cash savings review, Andrew Baddeley-Chappell, head of savings policy at the Nationwide building society, said: “We welcome the FCA announcement on access to savings and wholeheartedly agree with the need for greater transparency across the market so that customers can make informed decisions regarding their money. This is in line with Nationwide’s SavingsWatch service, which the FCA, in its January report, highlighted as an innovative example of how to communicate with customers through alternative methods.
“Savers should have the freedom to switch easily between savings providers and we are supportive of seven day switching for cash ISA transfers. We look forward to the industry continuing to make the switching experience even better so that customers can make the most of the opportunities available to them.”
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