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FOS News & Mis-sold Packaged Bank Accounts


The Financial Ombudsman Service [FOS] September 2013 news bulletin focuses on issues surrounding packaged bank account products and it is right to do so. There are those who dismiss the consumer detriment caused by such products. Generally they come to this view because of the comparably low monthly costs that such products attract (usually between £5 and £25 each month for an account). However, those who adopt this attitude miss the fundamental point and that is that customers should not be sold products that are not appropriate to their needs and circumstances.

Sounds familiar to how PPI was sold!

A packaged bank account, usually a current account, is an account which offers extra benefits in return for a monthly fee such as travel insurance, car breakdown cover and mobile phone insurance. Clearly, some packaged banks accounts might be suitable for some customers and there are times when such products save customers time and money. Sadly, however, like many other financial products sold by banks, customers often complain that they didn’t know they had been sold the product, did not realise that they were paying for the product and at times that they were not able to benefit from the items that should have been covered by the product. Sounds similar to the criticism of payment protection insurance [PPI] products and the way they were sold!

Banks forced to check eligibility for claims

Banks are now forced to check (and have had to since 2011) whether customers are eligible to make a claim in respect of the product benefits and ensure the product is suitable for the customer, taking into account their needs and circumstances. However, that does not help those who have had these products over a number of years.

How were packaged bank accounts mis-sold?

The FOS news bulletin helpfully gives details of a number of case studies:

  • The bank did not tell the customer about the age limit on the travel insurance – part of her packaged bank account
  • The bank told the customer that he would have to have a packaged bank account to have his loan application approved
  • The bank did not tell the customer that a paid-for bank account was optional
  • The customer did not know he had a packaged bank account – and that the bank upgraded the account without the customers consent

PPI over again – more mess for FOS!

And the similarities do not end there! Like PPI complaints, too many legitimate complaints are not settled by the banks as evidenced by the FOS uphold rates where FOS finds in favour of the customer after the bank has rejected the complaint. Like other mis-sold financial products, the number of complaints about this product is increasing and it looks like FOS will again have to sort out the mess caused by others.

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