Capital One has announced it is selling its savings business to Skipton Building Society.
The sale is likely to go through around the 27 July, when Capital One savers will move over to Skipton’s new brand, Castle Money. Customers with the American-owned firm, which has had a presence in the UK since 1996, were informed of the change by letter last week. The sale is still subject to court approval and it is not yet known how many people are affected or how much money is involved in the sale.
Brian Cole, interim managing director of Capital One, says it is more efficient for the firm to fund its lending through its US parent company, rather than through savers’ deposits.
”We value the relationship we have had with our savings customers and have worked hard to ensure a smooth transition,” he adds.
Skipton merged with Scarborough Building Society last year, and is currently the UK's fifth largest society with around 860,000 members.
However, the latest move has prompted concerns that Skipton and Capital One savers could fall foul of compensation limits. As it currently stands, individuals are covered up to £50,000 per bank under the Financial Services Compensation Scheme (FSCS).
This means that banks or building societies that share the same Financial Services Authority (FSA) licence are considered as one bank – savers with money in two institutions sharing a licence are, therefore, only protected up to £50,000 regardless of the number of accounts they hold.
Following the merger with Skipton, Scarborough Building Society savers have benefited from double protection under the compensation scheme; this is down to new rules introduced last December, which allow merging building societies to retain their separate licenses until December 2010.
However, a spokeswoman for Skipton says it is unlikely that Capital One savers will receive the same treatment. This means that Capital One customers need to check if they have existing accounts with Skipton, and ensure that their accumulated savings pot does not exceed £50,000.
To help people avoid losing their protection, Skipton is allowing fixed-rate savers a 60-day amnesty to move their money elsewhere. However, Vera Cottrell, principal policy adviser at Which?, says the compensation scheme needs to be reviewed in light of mergers and savings book sales.
“This is just another example of the inadequacy of the current compensation scheme,” she explains. “The FSA needs to address the shortcomings with the FSCS to ensure that consumer protection isn’t eroded when situations like this arise.”
Kevin Mountford, head of banking at moneysupermarket.com, also urges Capital One savers to keep a close eye on the details of the deal and make sure they move their money if their balance exceeds £50,000.
But he adds: “This should generally have a positive outcome for existing Capital One customers as Skipton offers a wider range of savings products with competitive rates."
It is not yet clear whether the Castle Money brand will just exist for former Capital One customers or if it will open up to new customers and launch its own product range.
Tracy Fletcher, spokeswoman for Skipton, says: "The brand was established to acquire Capital One customers and we are currently considering our options in terms of growing the brand into the future."