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The new bank mis-selling scandal

Robert Powell
by Lovemoney Staff Robert Powell on 01 November 2011  |  Comments 23 comments

A clampdown has been launched on the way banks sell fee-charging, packaged current accounts. Are these `perk' deals really worth shelling out for?

The new bank mis-selling scandal

Just when you thought it was safe to go back in the bank. As the waves of the PPI mis-selling scandal fade away, another quickly emerges, ready to wash away further chunks of the UK banking sector’s battered reputation.

The issue this time: packaged current accounts.

Packaged accounts

Packaged current accounts are paid-for deals that include extra ‘perks’ such as car, phone and travel insurance. On paper, they allow you to kill several financial birds with one fee-charging stone.

However City regulators have become concerned about the way banks are selling these accounts to customers.

Mis-selling

Having a current account that offers car, phone and travel insurance is all very well if you’re a jet-setting, iPhone-worshipping petrol-head. But it’s not so suitable if you can’t drive, haven’t left Scunthorpe in the last decade and think that BlackBerry Messenger is some sort of fruit-farm trade magazine.

And this is the core concern held by the Financial Services Authority (FSA). Namely, banks aren’t considering a customer’s circumstances when flogging them a fee-charging, packaged account. As a result, many could be paying for services they don’t need or aren’t even eligible for.

Indeed, research from Which? suggests that a third of consumers don’t use the packaged account extras they pay for. Bad news when the price of packaged current accounts has increased by 109% since 2006, according to figures from Defaqto.

New guidelines

The FSA has responded to these concerns by proposing new rules to make sure banks check a customer can use the facilities included with their account before concluding the sale.

In all honesty, the regulator’s new guidelines read like a ‘responsible selling for dummies’ manual.

Point one: ‘check whether the customer is eligible to claim under each policy’ included with their account. Yes, you heard that correctly: it’s the financial equivalent of, ‘if a man comes into your clothes store to buy some underwear, don’t sell him a bra’.

It’s somewhat depressing that banks need to be told this, while 16 year-old weekend shop workers just use their common sense.

The FSA rules also state that banks must provide an annual ‘eligibility statement’ prompting customers to review their circumstances and check if the policies still meet their needs.

And indeed, there is a responsibility on the side of the customer to ensure that any packaged account they take out does represent good value for money.

Most valued perk

So how do you pick the perfect packaged account (try saying that after you’ve had a few)? Well, it all really depends on what you want out of your deal.

Which? picked out travel insurance as the most used benefit bundled into packaged accounts, followed by commission-free travel money and breakdown cover.

The Co-operative Bank Privilege account is the cheapest deal to include annual family travel insurance. The account costs £114 per year. However this cover has, according to Which?’s analysis, only an equivalent worth of £65.

That means that to get the full value out of the Co-op deal, customers will have to utilise the built in mobile phone cover and card insurance, as the account does not include any breakdown cover or commission-free travel money.

But as I mentioned earlier, if you – and indeed your family – are only occasional travellers, this account may be a waste of time from the start.

Your best bet is to tot up how many times you’re planning on getting away in the following 12 months, take a look at how much a set of single policies or an annual policy would cost if you went direct to an insurer (use our travel insurance calculator), and compare the prices.

The best packaged account

Overall, Which?’s research identified the Santander Premium Current Account as the best packaged deal.

The account includes worldwide annual travel insurance for you and your family (with winter sports cover), a good breakdown policy, commission-free travel money and mobile phone insurance. However you will have to shell out for these perks: the account costs £240 per year.

It's also worth noting that the Spanish bank emerged bottom in a recent customer service poll that Which? also carried out. So you certainly may want to think twice before opting for this account.

The Halifax and Bank of Scotland Ultimate Reward account – a far cheaper account, priced at £150 per year – also scored highly in the consumer group’s survey. This deal includes annual family travel insurance (also with winter sports cover), commission free travel money and mobile phone insurance. Breakdown cover is also included, but the policy is far less comprehensive than Santander’s offering.

You can compare all of the current best-buy packaged accounts by heading over to our comparison tool.

But remember, always check the terms and conditions of all attached policies and think long and hard about whether you really need the bonus perks of a packaged account. Indeed, in many instances you may be better off simply opting for a regular free account.

Free current accounts

Here’s a run-down of the best free current accounts around at the moment:

Account

Credit rate (AER)

Overdraft rate

Need to know

First Direct 1st Account

N/A (£100 cashback when you switch)

£250 interest free, 15.9% after

Must pay in £1,500 per month to be eligible

Santander Preferred Account

5.0% for 12 months on balance up to £2,500, 1% after(£100-£300 cashback when you switch)

0% for 12 months, 50p per day (capped at 10 days) after

Must pay in £1,000 per month & have at least two active Direct Debits or standing orders

Halifax Reward Current Account

N/A - £5 per month cashback

£1 per day (up to £2,500)

Must pay in £1,000 per month

Co-operative Bank Account Plus

N/A

£200 at 0%

Must pay in £800 per month

Nationwide FlexAccount

N/A

Three months at 0%, 18.9% after

Free travel cover when you switch your main account

Lloyds TSB Classic with Vantage

1.50% on £1 - £1k

2.00% on £1k - £3k

3.00% on £3k - £5k

£10 at 0%, 18.9% + £5 per month usage after

Must pay in £1,000 each month

Source: lovemoney.com current account comparison centre

Both the First Direct and Santander accounts offer cashback if you switch. First Direct will give you £100 when you switch and another £100 if you decide to leave within 12 months. The account also offers a free £250 overdraft.

If you opt for Santander you can earn £100 just for switching, £200 if you already have a mortgage with the bank and you switch and £300 if you have a mortgage and a savings account (of at least £10,000) and decide to switch your current account. This deal also comes with a 5% credit rate for 12 months and a 0% overdraft for the first year.

However you will have to meet account funding criteria for both of these deals. See the table for full details.

Halifax also has a competitive reward account that will pay you £5 per month, providing you pay in at least £1,000 each month, although you will have to pay overdraft fees if you drift into the red.

So as you can see, competitive and ‘rewarding’ banking is available without a fee or packaged account in site.

Your experiences

Do you have a packaged current account? Is it any good?

Let us know using the comment box below.

More: Compare current accounts with lovemoney.com | Switch current accounts without fear | Halve the cost of your overdraft

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Comments (23)

  • wpeteraces
    Love rating 1
    wpeteraces said

    I have a Barclays packaged account, it gives me worldwide travel insurance for the family, mob. phone insurance and an Rac breakdown package. Plus cardholder protection and an interest free overdraft of £300 and home SOS. It worked out as advantageous to me. Cost is £15 per month.

    Report on 01 November 2011  |  Love thisLove  0 loves
  • Dame
    Love rating 32
    Dame said

    The days when banks were dull institutions of sobriety, where they looked after your money, were reluctant to give it back to you in case you spent it unwisely or gave you withering looks when you mentioned the word credit, are long gone. I remember being summoned by my bank manager many years ago, an old school fatherly type, who gave me a cup of tea and a digestive and gently told me that I really must get a grip of my spending (I had £250 overdraft) as he was rather concerned. This may sound like a scenario from the 1950's, but it wasn't that long ago (The late 80's)

    Bank mangers today want to sell you products to meet their centrally dictated targets. We are sold these products by unshaven youths who call you 'mate' have no depth of understanding on how these products work, economics, risk etc though they do have a nice exam. They then award themselves vast commissions having filled out a form. Lloyds tried to get me to take out life insurance, the meeting lasted 15 minutes and week later I got the quote, not I may add even sent to me on headed note paper but printed off at home, I kid you not. When I read the small print the commission payable from the Life Insurance company (That Lloyds owned) to Lloyds was...£8000 and of course we all know where that would be coming from.

    Banks are ruthless bastards who want your money, they want to extract as much as they can from you and want to sell sell sell. As we seen in recent years much of the time they don't even understand exactly what it is that they are selling or they just lie about it. Once you accept this then you may find some peace.

    Once upon a time Banks either looked after your money, traded on their own account or for clients. They never mixed the three up under one roof because of the huge conflicts of interest. That was until Thatcher came along and the yanks started whispering in her ear about deregulation and opening up the markets in the UK. Of course now they want to split everything up again. Genius, absolute genius.

    Report on 01 November 2011  |  Love thisLove  1 love
  • CuNNaXXa
    Love rating 410
    CuNNaXXa said

    My bank keeps trying to get me to attend a review. What they actually mean is that they want me to attend a session whereby they will inform me that I NEED life insurance, pension, endowment and any other form of savings or insurance that will guarantee smoked salmon for another week.

    Never trust anyone who is on commission, because they work to their advantage rather than yours. If you take advice, try to find someone who is on a fixed salary or, alternatively, who charges a one off fee for impartial advice.

    In fact, quite a few mortgage advisers operate on the unconditional fee basis, so once you've paid them, they will tell you the best offer for you, not them. Our last mortgage adviser worked on commission and he got us a mortgage that was best for him, along with an extremely expensive life insurance policy that ensured he was eating smoked salmon for many years to come.

    Report on 01 November 2011  |  Love thisLove  0 loves
  • AdAstra100
    Love rating 27
    AdAstra100 said

    I think supermarkets should ask at the checkout whether the Customer actually needs each item in their trolley just to prevent more miss selling. Its disgraceful that people get home and they find that they have things which they cannot use or do not need.

    By the way ever tried checking your home insurance policy to see if it covers more than you need?, or car policy which often has road recovery which you may not use or you have forgotten you already had separate cover? If you wake up and find you have both the AA and RAC wanting to rescue you, why not claim for miss selling? If you do who do you claim from? Make sure its anyone but the idiot who can't manage his/her own affairs!

    For goodness sake ,if we cannot educate people sufficiently to make their own decisions on whether they have a mobile phone or not for which they may or may not need insurance, its no wonder we are descending into a bureaucratic nightmare and having to legislate for complete idiots!

    Report on 01 November 2011  |  Love thisLove  1 love
  • The Financial Advisor
    Love rating 0
    The Financial Advisor said

    It's great to see the reactions from everyone/general public on the issue of banks mis-selling. So I am going to put this question out there.....if you are so concerned why not write to your bank and do something about it? If you are concerned about packaged current accounts, home insurance polices, and car insurance policies do something about it!?

    Why not write to your bank and ask for a pick 'n' mix bank account where you can add on the facilities you wish to use! If we all wrote back to them saying we want this and created a demand I'm sure that this would be done!

    As for Dame.....wake up smell the coffee and listen to yourself! back in the day.......yawn! grow up and learn how to manage your own money! come on!? seriously did you need a bank manager to tell you what to do back then? I can safely say you have jumped on the band wagon because you have nothing else better to do!

    As a financial advisor i can safely state that the commission payable of £8000 is a mis-interprtation of your client specific illustration provided to you buy your advisor / bank. It sounds like you were being advised on a funeral policy and the premiums you would pay over the term would be £8000. At least the advisor who gave you the quote had the decency to post it to you and let you read the illustration but you still failed to understand it! what a shame!

    PS: I DON'T KNOW IF ANY OF YOU HAVE NOTICED BUT THE BACKGROUND TO THIS ARTICLE IS COLOURED IN THE CORPORATE COLOURS OF SANTANDER! SO DID ANYONE THINK AS TO HOW MUCH SANTANDER PAID LOVEMONEY IN THE FORM OF COMISSION TO PLACE THIS ARTICLE!!!!!?????

    I GUESS NOT!

    Report on 01 November 2011  |  Love thisLove  0 loves
  • jenc
    Love rating 1
    jenc said

    Well it is buried somewhere in the very small print thatthat you aren't even covered by the insurance if you are over a certain age. They could cwertainly be more upfront over that

    Report on 01 November 2011  |  Love thisLove  0 loves
  • Iamcoldsteve
    Love rating 329
    Iamcoldsteve said

    I did think the article was written so that Santander come out smelling of roses. I wonder if the result was in and that is why the article was commissioned?

    Anyway, one thing about 'bank account reviews'. After leaving university, with an smallish overdraft, I was paying it off with random amounts every month, when they asked me to come in for a review. As I like to understand what I am hearing, I said that I would consider their options and come back in a couple of weeks (which I can't say they were particularly overjoyed with). I assessed each and every option they came up with, and compared them all to continuing with how I was doing it (using the monthly average I had been paying it down with). It may come as a surprise that each and every option the bank suggested cost me more money. I think they were genuinely surprised when I came in with a printed excel sheet with all the figures on, with a comparison to my method. After I explained the workings (I shouldn't have needed to, but it was actaully necessary), I politely declined their not so generous options and left. They also tried every comment in the book to persuade me, but the facts don't lie.

    As I am numerically astute, I found it easy to see through their words. BUT it did make me think how many other people would just accept what the bank told them was the best option? Some may have been the best option ........ for the bank.

    Report on 01 November 2011  |  Love thisLove  1 love
  • John Fitzsimons
    Love rating 43
    John Fitzsimons said

    Iamcoldsteve and The Financial Adviser

    You are quite right, Santander is indeed an advertiser. As you will have noticed, you don't have to pay anything to use lovemoney.com, so we have to make some revenue through advertising. This is not a charity. We have staff with mortgages to pay after all.

    However, I can assure you that anyone who advertises with this site does not have any say in the articles we write. The issues with the standard of customer service many people receive from Santander are mentioned in every single piece we write about the bank - hardly something Santander would be insisting upon were they to have any influence over editorial.

    John

    Deputy Editor

    Report on 02 November 2011  |  Love thisLove  0 loves
  • cpt_strangepork
    Love rating 1
    cpt_strangepork said

    One thing you failed to mention is the level of cover offered by some packaged accounts for mobile phones. Many will not cover the replacement value of an iPhone or other smart phones. I took the Halifax Reward account at £7.50 (£12.50 - £5.00 reward) per month I get cover for my BB anf my wife's iPhone for the same as we previously paid for one phone. Breakdown, Home Emergency and Travel Insurance is a bonus on top.

    Report on 02 November 2011  |  Love thisLove  0 loves
  • jedi44
    Love rating 43
    jedi44 said

    The table here makes the Nationwide FlexAccount travel insurance inclusion sound like simply a ruse to get people to transfer to their current account. This is not so. I have been an existing Flexaccount holder for years and the cover was added to my account automatically. It is also free so nothing to do with monthly fees. As a cynic, I suppose they make up the cost somewhere else, although it hasn't affected the cost of my account usage.

    Report on 02 November 2011  |  Love thisLove  0 loves
  • sketharaman
    Love rating 8
    sketharaman said

    +1 to AdAstra100. I don't know if there's a better way of saying this, but this is a whole lot of crock. Banks didn't invent the saying, "a fool and his money are soon parted". Why blame them when someone is so dumb as to buy a packaged current account without having the wherewithal to figure out whether they can use the add-ons or not? As a professional marketer on the one side and customer of several banks on the other, I strongly doubt if there are so many such dumb buyers in the first place. Even if there were, their IQ levels would be too low to enable them jump the several hoops required to receive redressal from regulatory bodies anyway.

    Report on 02 November 2011  |  Love thisLove  0 loves
  • Dame
    Love rating 32
    Dame said

    The Financial Advisor - I do not need to grow up nor do I need to manage my money as I have done that very well over the years and continue you do so by not trusting banks or financial Advisors.

    As I have grasped the art of reading English at primary school some time ago, I can confirm it was not a funeral policy and that the commission was and still is there in black and white, £8000. Sorry that you find this so offensive or unbelievable but I have the letter, you don't. Still as you say, they managed to post it, how nice, next time they may manage to find the right paper.

    Just because you don't share my views, does not mean I have jumped on any bandwagon. However, if you have something better to do than be rude, please feel free to leave at anytime and go and do it.

    Report on 02 November 2011  |  Love thisLove  0 loves
  • The Financial Advisor
    Love rating 0
    The Financial Advisor said

    Dame.....So much to learn.

    Report on 02 November 2011  |  Love thisLove  0 loves
  • CuNNaXXa
    Love rating 410
    CuNNaXXa said

    I had a Financial Adviser who, upon receiving MY instruction to use MY conveyancer, decided that he would prefer to use HIS conveyancer.

    I did manage to get him to change conveyancers, before sacking him, but this is not an isolated incident. I have heard from many people who have been misled by a financial adviser.

    Oh, and before anyone says that we should read the small print, the whole reason we employ, or are required to employ, the services of a financial adviser, is so that they are the bridge between us and the financial providers.

    In business, employers often employ employees who turn out to be nothing but trouble. Financial Advisers are no different from any other employee, in that you can always find bad apples in among the good, and the bad apples give the job the bad name it currently has.

    Report on 02 November 2011  |  Love thisLove  0 loves
  • oldhenry
    Love rating 343
    oldhenry said

    My bank offerred me a deal tha tincluded travel insurance for me and the wife for £15 a month incluisve. I was flabbergasted. I told them we paid nearly £600 for travel insurance currently - world wide- how coud they possibly do that deal for £15 a month inclusive of other benefits? I got no answer - nor did I get a detailed policy that I requested before proceeding to compare the cover available. I presume this 'cover' is rubbish as was most of the items they were offerring for £15 a month. I prefer to have free banking and none of their frills that Ihave not missed over the last 50 odd years. It is a con- simple but there are enough suckers out there to make it worth their while.

    Report on 02 November 2011  |  Love thisLove  0 loves
  • Dame
    Love rating 32
    Dame said

    The Financial Advisor - Hey impart some of this knowledge of your so we can all learn from your sage advice.

    Report on 03 November 2011  |  Love thisLove  0 loves
  • MK22
    Love rating 169
    MK22 said

    Come on Dame! S/He's a financial advisor, that's not going to happen, read the rest of the posts! lol!

    Report on 04 November 2011  |  Love thisLove  1 love
  • davply67
    Love rating 0
    davply67 said

    I had a Halifax Ultimate Reward card which was costing £12:50 a month, after a period of time I realised the benefits it was offering were of no use to myself, as I am not a car driver, very rarely travel out of this country, so I switched back to the normal current account, I would think this type of account will have cost me approximately £200/250 extra for something which was of no use what so ever.

    Due to my financial situation I am no longer with the Halifax as all of affairs are dealt with by a dept management company, so could I claim these unfair charges back?

    Respectfully Yours

    D Plumley

    Report on 04 November 2011  |  Love thisLove  0 loves
  • dmhzx
    Love rating 30
    dmhzx said

    Well I hope thetravel insurance cover actually provides some. - Unlike Insure and go, who won't pay out on any claims unless you have the orginal receipts for EVERYTHING you want to claim for. No matter how old it was when stolen. - Sure Insure and Go are cheap, but they're cheap because they don't actually offer any cover at all.

    Report on 05 November 2011  |  Love thisLove  0 loves
  • dmhzx
    Love rating 30
    dmhzx said

    Oh, and pnote that the Santander 50p a day, is charged for every day you're overdrawn AT ALL (even 1 p). -- The co-op is looking like a good deal right now. Must investigate that.

    Report on 05 November 2011  |  Love thisLove  0 loves
  • SeaBee
    Love rating 15
    SeaBee said

    @dmhzx, The purpose of all insurance is to provide peace of mind. This peace of mind lasts until the moment that you receive a reply to your claim.

    Report on 05 November 2011  |  Love thisLove  0 loves
  • coloratura
    Love rating 81
    coloratura said

    An old but true saying:- "You don't get owt for nowt" and the second old saying:- "If it looks too good to be true, it usually is". Apply these to most things and you won't go wrong.

    Report on 06 November 2011  |  Love thisLove  0 loves
  • fenemore
    Love rating 251
    fenemore said

    Whilst Bank front of house employees are paid by results (commission), then nothing will ever change. Those employees have bills to pay - their loyalty will not be to you, or the bank, but to themselves.

    Their base salary is derisory - this is deliberate to make them commission hungry. The very last thing on their mind is YOUR welfare, or whether they are "miss-selling". If they don't meet their targets, they are stuffed!

    Report on 09 November 2011  |  Love thisLove  0 loves

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