Are Packaged Bank Accounts A Mis-selling Scandal?

28th January 2013

Banks in the UK have been embroiled in many recent mis-selling scandals. Claims for mis-sold PPI are currently in full flow; before that we had unfair banks charges, pension mis-selling, and endowment mis-selling. It would appear that we’re now in the early stages of the next scandal, with questions being asked about the “packaged accounts” that banks have been so fond of selling to us.

What are these “packaged accounts”? They are the bank accounts that come with a monthly fee. They typically include benefits like travel insurance or mobile phone insurance. Packaged bank accounts have been sold very hard by the banks, with branch staff often targeted and incentivised to sell them to us. There are thought to be around 10m such packaged bank accounts in the UK.

Why might such packaged accounts have been mis-sold to us? Common reasons might include:

  • You were moved into such a bank account without being made properly aware.

  • You were told you had to take one in order to qualify for another service from the bank.

  • You were sold an insurance policy that you didn’t qualify for (perhaps because of your age).

  • You weren’t told you had to register your iPhone for the mobile cover to come into effect.

  • You weren’t told that there were also free bank accounts.

  • You were pressured unduly into taking your packaged and paid-for bank account.

This new potential source of claims against banks has developed rapidly in recent months:

  • Towards the end of 2012 there was speculation that banks were concerned that they might be exposed to accusations of mis-selling packaged accounts and therefore claims.

  • One major bank instructed that their staff stop selling such packaged accounts as they apparently feared their sales processes were flawed and exposed to criticism.

  • In mid-December 2012 The Independent and other newspapers reported that the “claims industry is gearing up for a lucrative new round of legal battles”.

  • In early January 2013 consumer websites were reporting that the authorities (such as the Financial Ombudsman) were open to receiving complaints about mis-sold packaged bank accounts.

  • MoneySavingExpert later produced a guide to claiming back money on such packaged bank accounts yourself if you consider that one was mis-sold to you.

  • Now claims companies are offering to handle a claim for a fee (which is likely to start from 25% plus Vat of any winning claim).

If you have a packaged bank account should you now make a claim? The answer is “not necessarily”. Many people made an informed decision to take such an account, calculating that the benefits made financial sense for them. In such circumstances making a claim probably will not be appropriate, though you should still check first to make sure you were actually covered by the insurance policies in the way that you thought you were. Others may take the view that they have not been treated fairly by their bank and therefore they wish to make a claim.

How about if you’re currently in a Scottish trust deed? Would it make sense to make a claim and would you be able to keep the proceeds? You’re likely to find that if your claim is successful your trustee is likely to require the funds to be paid into your protected trust deed to help repay your creditors. You should bear this in mind when choosing whether to make a claim.

Trust deed firms are currently handling PPI claims for their clients. Will they start to insist upon making packaged bank account claims for their clients as well? We’re not aware of any trust deeds providers that are doing so at the current time, though it would not come as a surprise if they began to integrate this with PPI claims processes at some point in the future. Much will depend upon the instructions received from their regulatory bodies.

The issue of packaged bank account claims is likely to develop throughout 2013 and we will report here on any significant developments.

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Wylie & Bisset Grant Thornton

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