Consumer Focus welcomes the measures announced by the OFT to address the gross inefficiencies in the cash ISA market. The consumer champion said these are necessary first steps to drag the £158 billion¹ cash ISA market into the 21st century.
Cutting the length of ISA transfers to 15 working days could save consumers up to £14.5 million². Removing multiple layers of complexity, confusion and delay will mean that consumers can more easily understand what sort of shape their savings are in and whether they would be better off switching account.
The Consumer Focus super-complaint argued that consumers are attracted with good headline rates, which disappear within months. Banks then fail to keep consumers informed about current interest rates and make transferring accounts an ordeal. It is promising that banks have accepted they have a lot of work to do to. Now is the time for them to show that they are ready, willing and able to compete for ISA customers by providing greater transparency, better customer service and efficient transfer performance.
Consumer Focus wants to see a dramatic improvement in transfer performance by next Spring when the majority of ISAs are transferred. If transfer times are not meeting the 15 day guidelines, Consumer Focus is calling on the Financial Services Authority to identify the worst performing banks.
It is important that the OFT notes there are also lessons to be learnt for other financial products. This is a warning shot across the bows of the banks with the simple message that opaque business practices have no place in a modern customer-focussed banking sector.
As well as the measures announced today to improve cash ISAs, Consumer Focus would urge the banking industry to go further by:
- Automatically paying consumers their new rate of interest after 15 days, no matter which provider is at fault for the delay. Consumers shouldn’t pay for shoddy service and inefficient systems. We agree with the OFT that this should become part of the Banking Conduct of Business Sourcebook (BCOBS).
- Speed up the timetable for printing interest rates on customer statements. Again, the May 2012 deadline should be the latest deadline not a target.
- Following the OFT’s recommendation that interest should be paid on every day of the transfer, ending the practice where money sits between banks earning no interest for the customer.
- Providing information on transfer times to the FSA which detail the performances of individual banks and building societies, so the best and worst performers can be clearly identified. The monitoring of transfer times must give banks that are failing their customers nowhere to hide.
Mike O’Connor, CBE, Chief Executive of Consumer Focus, said:
‘The OFT found that there are problems in transferring cash ISAs. This market is inefficient, secretive and stops people making informed choices about their life savings. The OFT have given banks a sharp reminder that they have over 17 million cash ISA customers with £158 billion of their savings deposited with them. They deserve a decent level of service and, to date, they have not been getting it.
‘We live in the age of keyboards, not quills. ISA transfers should take days not weeks, certainly not over a month. For competition to work for consumers, they need to be able to switch simply, quickly and with the right information. The 15 day transfer guideline is very welcome, but it must be a benchmark for banks to improve upon – the bare minimum and not a target.
‘It is disappointing that the banks have set a deadline of May 2012 for putting interest rates on statements – consumers will be right to ask if it is reasonable to wait so long for such a basic change.
‘We urge everyone to make sure their complaints about ISAs go on the record – customer complaints will be an invaluable tool for keeping the banks’ feet to the fire. At the moment if every saver moved onto the best deal, they would collectively gain billions. This is one industry where loyalty clearly doesn’t pay.’
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Consumer Focus is the independent champion for consumers in the UK. Consumer Focus gives a strong voice to consumers on the issues that matter to them and works to secure a fair deal on their behalf. We work with consumers and a range of organisations to tackle the problems customers face and to achieve creative solutions that make a difference to peoples’ lives.
¹ The market value of cash ISA funds has risen to £158 billion by 5 April 2009 (HMRC figures)
² Based on 12 per cent switching rates (Mintel ISA Finance Intelligence August 2009) of the £158 billion cash ISA market. Assumed the new interest rate is 3 per cent currently available on the best fixed rate cash ISAs and 11 extra calendar days’ interest is earned (23 working days down to 15 working days).
John Cottrill
Senior Media Officer
020 7799 8006