The problem with packaged bank accounts
15/02/17 Back in the year 2000….
Cast your minds back to the year 2000. We’d all danced to 1999, watched the Queen look awkward at the Millennium Dome and gone to bed (eventually) wondering what the 21st century would hold.
Seventeen years later (!) and the millennium celebrations seem like so long ago. And so much has happened since then, from bank crashes to Brexit.
Back at the turn of the century, a lot of the big banks went into a sales overdrive. In fact, if you went into a local branch of your bank in the first decade of the new millennium it was virtually impossible not be treated to a sales patter, whether you wanted it or not. And the most aggressively sold product was the packaged bank account.
What is a packaged bank account?
You might know them as the ‘gold’ or ‘premium’ account – there are lots of variations. But put simply, a packaged bank account is a normal bank account ‘packaged’ with other benefits. Each month you pay a fee (usually from £6 - £25 but some accounts were much more). Every bank has a variation on a packaged account, but typical benefits included:
- Higher overdraft rates
- A better interest rate
- Travel insurance
- Legal aid insurance
- Mobile phone insurance
- Boiler or emergency cover
Sounds good in theory, doesn’t it? The problem is many bank staff were told they had to sell a certain number of packaged bank accounts each week as part of their targets. Before long, the papers were filled with stories of elderly people repeatedly being signed up to packaged bank accounts despite never wanting them, or angry consumers fed up that a trip to the bank involved a sales speech before they could get their money out.
Around about this time the behaviour of the banks came under quite a bit of scrutiny – at which point came the crash of 2008. And the aggressive sales practices of the past, we’re happy to say, came to an end.
Are packaged accounts the next PPI?
Though packaged accounts were widely mis-sold at the time, it’s very different to the scale of PPI and there’s one big difference. Lots of people found (and still find) their packaged accounts useful. PPI was often forced on people without telling them or by misleading people, generating huge sums. Packaged bank accounts are lower cost and the benefits are pretty transparent. Yes, they were widely mis-sold at the turn of the century, but it’s not quite the same deal.
b2sion of cases about packaged bank accounts – over 86,000 (up from 18,000 in 2015). So this issue isn’t going away anytime soon.
What do people complain about?
There are three main areas of complaint with packaged bank accounts:
- “ I never wanted the account but they signed me up anyway”.
- “ I was tricked into taking the account (not told about the free options, told I had to take it to get a loan, credit card, etc.)”.
- “ I can’t take advantage of the account as I can’t use the products packaged with it”.
So what happens if you want to make a complaint?
“I never wanted the account”
The first complaint is pretty straightforward. The bank checks its records and if it’s clear you’ve opted in without permission (or not clear at all) they may offer a full or partial refund. However, if ten years have passed, you won’t usually see a refund of all those monthly fees. This is because part of our contract with the bank is to check our accounts regularly - so if you haven’t noticed a regular payment for years, then you may have to share the responsibility and accept a partial refund.
This may seem pretty obvious to say, but if you’ve used certain benefits – like made a claim on an insurance policy packaged with the account – then you will find it difficult to argue that you didn’t want the account. Believe us, this one crops up all the time.
“I was misled into taking out the account”
This issue is a lot more serious, though not always so easy to prove. If you think you were tricked or misled into taking out the account then note down all you can remember from the time – or if you can’t recall much, tell the bank about your circumstances at the time. This can help them determine if the account wasn’t affordable or suitable.
In most cases, a refund would apply, with interest if it can be established you’ve been misled. At the worst end of the scale, we’ve seen some people who struggled with English or with learning disabilities being tricked into taking out the accounts. The FCA (the regulator) will want to know about these cases.
“The benefits don’t apply to me”
This is a little different to misselling. The bank won’t necessarily know everything about your situation so it might not have deliberately mis-sold the account. But if you couldn’t have taken advantage of the benefits, the money you’ve paid isn’t really worth it, so you might be entitled to some of it back.
The best example is travel insurance. These ‘packaged’ policies tend to be quite basic. So leaving aside the fact that you might not get much actual cover, they tend not to insure people over the age of 70. Now if you’ve gone on holiday and found out you’re not covered, the consequences are serious (we can help with that too). Regardless, this part of the deal won’t be worth the full fee your paying.
The banks are now required to review the benefits you get with a packaged bank account and write to you once a year to tell you if they think you won’t be able to use them anymore. But rather than wait, take a look at the products you’re paying for. If you can’t use them, talk to your bank and ask them what they propose.
One last thing…
We’ve said it lots of times before but regardless, don’t use a claims manager to make your packaged bank account complaint. The ones we’ve seen have been terrible – and they honestly won’t improve your chances of winning. Click on to the Resolver website and our complaints tool will allow you to make your complaint direct – with no fuss. And most importantly, it’s free.