The Financial Conduct Authority (FCA) has suggested that some aspects of the packaged bank account (PBA) market are now delivering better outcomes for customers, but that firms could still improve their complaint handling. In October 2016, the financial watchdog published its thematic review into various aspects of the PBA market.

Many claims management companies have been active in the area of PBA mis-selling claims in recent years. PBAs are bank accounts where the customer pays a monthly fee in exchange for receiving a number of benefits, such as travel insurance, breakdown insurance or insurance for electronic gadgets. However, there have been a number of cases of customers being sold PBAs where they cannot claim on the associated insurances, or where they were either told by the firm that there was no alternative to a PBA, or were ‘upgraded’ to a PBA without their knowledge or consent.

In response to some of these concerns, since 2013 firms selling PBAs have been subject to new rules. They must now establish whether applicants would be eligible for each of the individual insurances offered under an account before selling it. Firms must also issue annual eligibility statements to account holders confirming whether these customers remain eligible to claim on the various insurances.

Since the introduction of these rules, the FCA says eligibility checks for travel insurance have improved, but firms could still improve their checks in relation to other insurances offered with PBAs, such as gadget insurance and motor breakdown cover. Depending on the type of cover, eligibility checks might need to cover a customer’s age, state of health, status as a UK resident or otherwise, and the age of a customer’s electronic gadgets.

The FCA also says that some firms can improve their complaint handling standards. It found that only 44% of mis-selling complaints received by firms resulted in a fair outcome for the customer, and that in only 22% of mis-selling complaints did the firm follow its own policies and procedures correctly.

Uphold rates for PBA complaints at the Financial Ombudsman Service (FOS) have fallen sharply in recent years. In the year to March 31 2014 the FOS upheld 77% of PBA complaints, in the year to March 2015 it was 33% and in the year to March 2016 only 14%. However, figures for the most recent quarter of the 2016/17 financial year suggest that the uphold rate has risen again to 23%. The actual number of PBA complaints being made to the FOS continues to rise sharply.

In summary, the FCA review says that “we continue to believe there is a place in the market for packaged bank accounts, as they can provide good value and convenience for customers. Through our review, we have identified some areas of good practice, particularly the customer-centric approaches generally adopted by firms. However, we observed some practices in our review samples which, if they were replicated more widely, would indicate that firms are at risk of failing to meet our requirements. Firms have more to do to ensure customers are treated fairly, both when they take out a packaged bank account and when they complain.”

All firms that were involved in the thematic review have received individual feedback from the FCA. Other firms in the PBA market are now expected to read the review and make changes to their sales and complaints practices as required. The regulator also says it will publish a further review in the future which will look at firms’ handling of more recent complaints.

Jonathan Davidson, Executive Director of Supervision – Retail and Authorisations at the FCA, said:

“We continue to believe that there is a place in the market for packaged bank accounts, as they can provide good value and convenience for consumers.

“But we expect these products to be sold fairly and for customers to have the information they need to make an informed choice. And customers should not have to complain to the Ombudsman to get a fair outcome if things go wrong.”

The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware the facts, circumstances or legal position may change after publication of the article.