Switching cash savings accounts will become quicker and easier under proposals announced by the FCA today. The FCA will 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.”
- 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 which 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.
Notes to editors
- Part I: Feedback on proposed remedies - Part II: Consultation paper
- To comment on the proposals, please send your views by 12 October 2015 via the online response form or in writing to:
Strategy and Competition Division
Financial Conduct Authority
25 The North Colonnade
London E14 5HS
- The final findings of the cash savings market study were published in January 2015 and found that providers have significant amounts of consumers’ savings balances in accounts opened long ago yet these accounts pay lower interest rates than those opened more recently. It also found that the largest personal current account providers have considerable advantages because they can attract most easy access balances despite offering lower interest rates. It set out that providers need to improve the transparency of their practices, that many consumers are put off switching by the expected inconvenience of opening a new account and 80% of easy access account s had not been switched in the last three years. The final findings and proposed remedies are set out here: MS14/2.3: Cash savings market study report: Part I: Final findings Part II: Proposed remedies.
- On the 1 April 2013 the Financial Conduct Authority (FCA) became responsible for the conduct supervision of all regulated financial firms and the prudential supervision of those not supervised by the Prudential Regulation Authority (PRA).
- The FCA has an overarching strategic objective of ensuring the relevant markets function well. To support this it has three operational objectives: to secure an appropriate degree of protection for consumers; to protect and enhance the integrity of the UK financial system; and to promote effective competition in the interests of consumers.
- Find out more information about the FCA.