New rules for packaged accounts announced

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packaged accounts

packaged accountsBanks and building societies will have to assess whether customers taking out packaged accounts are eligible for insurance offered as part of the deal under new plans.

The move is part of the Financial Services Authority's (FSA) plan to prevent banks and building societies mis-selling packaged accounts to parents and other customers.

One in five of us pay a monthly fee for a tailored account bolstered by extra features. However the FSA plans to boost transparency among such accounts and ensure people know whether they're eligible to use all its features, such as travel insurance, mobile phone insurance and breakdown cover.

Concerns

The move comes after concerns were raised that some customers have been unable to claim on the insurance policies with such accounts. The FSA said many people took out accounts believing they were covered by each policy to find out that wasn't the case.

Fears were also expressed that parents were wasting money with packaged accounts, forking out for extras they could ill-afford. Experts suggested many people were paying for extras they would never use, such as access to the business class lounge at airports.

Protection levels

The new rules will take effect from the end of March in a bid to provide customers taking out packaged accounts with protection on a par with if they'd bought each product individually.

Under the plans, banks and building societies will have to run checks to ensure customers will be able to claim on each individual policy. This information will then have to be passed on to the customer. Sales advisers will then have to inform people whether the insurance would or wouldn't suit them.

Another measure will see customers receive eligibility statements each year to ensure the account is still right for them and that they're making use of its functions.

A growing market

An FSA spokeswoman said the rules were being introduced to get to grips with a "growing market".

Sheila Nicoll, FSA director of policy, said: "These products are often referred to as upgraded accounts but if you end up paying for an element you can't claim on, it's money down the drain."

The FSA added that it wasn't expecting a wave of mis-selling cases to emerge like the payment protection insurance (PPI) scandal.

In recent months many people have launched bids to re-claim mis-sold PPI, but knowing how to go about it can be confusing. This guide offers the low-down on reclaiming PPI.

 

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