Paid-for currents accounts could become the next bank mis-selling scandal as increasing numbers of customers complain that they cannot use the advertised perks, the financial watchdog warns.

Paid for current accounts may be next scandal, watchdog warns

Paid-for currents accounts could become the next bank mis-selling scandal as increasing numbers of customers complain that they cannot use the advertised perks, the financial watchdog warns.

Banks are also switching current account customers to paid-for accounts without their knowledge, the watchdog warned Photo: Rex Features

By Josie Ensor

6:00AM BST 29 May 2013

The Financial Ombudsman Service (FOS) has received a record number of complaints from people unhappy with the accounts offered by major high street banks after discovering that the included insurance deals were unsuitable.

Banks are also switching current account customers to paid-for accounts without their knowledge, the watchdog warned, with many only noticing when they see the charge debited from their account.Paid-for accounts can cost from £6.50 up to as much as £40. In exchange for this monthly fee they offer benefits, such as holiday and mobile phone insurance.

However the watchdog said today that many customers say that when they have tried to make a claim on one of the insurance policies, they have found that they do not qualify due to their age or the type of product they have.

With a fifth of adults in the UK paying for their current accounts, experts warn it could become the next big mis-selling scandal.

The watchdog said today, as it released its annual review, that it feared some customers were wasting their money on paying monthly fees for products they did not need and have not used.

“As with PPI, customers are being sold packaged accounts by banks who are often unaware of a person’s situation. People have found themselves with add-ons they cannot use because they are too old for the travel insurance or their phone is too expensive”, said Rory Stoves, spokesman for the FOS.

The ombudsman also warned that some customers only realised they had a packaged account when the charge showed up on their statement in an unclear way as an “administration fee”.

Overall, the watchdog saw the number of complaints it deals with increase by 92 per cent.

Four of the UK’s big banking groups – Lloyds, Barclays, HSBC and Royal Bank of Scotland (RBS) – accounted for almost two-thirds of all complaints received by the ombudsman, increasing their share from 52 per cent the previous year.

In April the service issued guidelines to ensure banks sent out statements to customers to inform them of their eligibility.

However, some customers feel they are being pressured into taking the accounts without knowing whether they are right for them.

Meanwhile, complaints about current accounts have increased by over a third, following two years of declines, according to the ombudsman’s new figures.

The level of dissatisfaction over current accounts has for the first time reached the same level as credit card.

More than 19,000 people complained about issues with their current account, with many saying that their banks would no longer extend their overdrafts as they would in the past.

Many had their overdraft facilities withdrawn without any warning and found their bank to be inflexible over the repayments.

Customers were also finding it much more difficult to cancel continuous payments, such as online memberships.

Over the course of the year, nearly half of cases were upheld by the ombudsman in consumer’s favour, including 69 per cent of complaints relating to payment protection insurance (PPI).

The PPI scandal drove the upswing in complaints, making up almost three-quarters of the cases dealt with by the service. Complaints about PPI more than doubled year-on-year.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (, the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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