11th March 2010
Consumers are being warned by the Financial Services Authority
(FSA) to steer clear of bank accounts which charge monthly fees for
extra benefits.
The city watchdog says accounts with bundled extras such as
insurance are potentially being mis-sold to millions of consumers
as the package is often too expensive and inadequate.
The FSA said consumers would be better off purchasing these
products individually or not at all, and estimated that 15% of the
adult population may already be losing out through packaged
accounts.
In its Financial Risk Outlook for 2010, the FSA said: "Packaged
accounts may offer value for money for some consumers, but they may
not benefit all.
"Some may find that where the add-ons are insurance products,
they do not provide the expected level of cover."
The warning came as the FSA said that banks under pressure from
the lingering effects of the credit crunch and the recession may
seek to restore profits by selling inappropriate policies and
products to their customers.
It warned that financial services firms "must not increase
margins in ways that result in unfair treatment of consumers."
For example, the FSA said banks offering loans solely to people
who open an account with them, thus attractive those savers' money,
may not be acting in the consumers' best interests.
"These products could offer good value for some consumers as
they are not necessarily higher risk," the FSA said.
"However, there is a possibility that some consumers may not
fully understand the terms and conditions of these products."
It also warned that under-pressure firms may begin mis-selling
inadequate and narrow insurance products, similar to mis-sold
payment protection insurance (PPI), in order drive up profits with
detriment to the consumer.
"New products are emerging which have similar characteristics to
PPI," it said.
Claims Financial