Beleaguered savers, who have had to put up with low interest rates for over five years, have been given fresh hope with the news that the regulator will soon crackdown on some of the poor practices used by banks and building societies.
Following a review of the savings sector earlier this year, the Financial Conduct Authority (FCA) has announced a range of measures which, if adopted, will help savers to better understand the type of account they have and to ensure they are fully informed when interest rates are cut.
Although these are only proposals at the current time, experts believe the changes could help savers who lose up to £120 million each year through banks and building societies reducing interest rates by “stealth”.
Interest rate cuts
The FCA intends to make sure that savers are clearly alerted to any changes in interest rates, which banks and building societies may be forced to do in writing. At the moment savers only need to be told if the change to their account is “material”. However, banks and building societies are allowed to decide themselves which changes can be classified as “material”; which naturally leads to inconsistent practices and confused consumers.
Under the proposals savers will also be altered when introductory or ‘teaser’ rates come to an end and when a fixed term account expires.
The FCA will also stop bank banks and building societies from using misleading names on accounts, which are designed to give the impression that the interest rate payable is actually higher than in reality.
Cash ISA transfers
There is also good news for Cash ISA (Individual Savings Account) savers who are looking to transfer to a more competitive interest rate.
At present the process can be laborious and time consuming, however the FCA is proposing that Cash ISA transfers will have to be completed in just seven days by 2017.