Banks will be forced to speed up the transfer of individual savings accounts, and increase transparency on interest rates the Office of Fair Trading has announced.
In a move that will benefit millions of consumers, the OFT has secured an agreement from the banking industry that:
- From 31 December 2010, cash ISA transfers should be completed within 15 working days, down from 23 working days.
- From 2012, banks must publish clearly the current rate on all cash ISA statements to customers.
The move came after a 90-day investigation into the way banks treat cash ISA customers, which was prompted by a super-complaint made by consumer campaign group Consumer Focus.
Consumer Focus argued customers are lured in to cash ISA deals when the banks advertise attractive headline interest rates, which then disappear within months.
Banks then fail to keep their customers informed of changes, and make it difficult for them to transfer to another provider.
The OFT says the greater transparency and quicker transfers it has secured will enable consumers to switch to better deals more easily and swiftly.
Financial consumer groups have welcomed the news.
The cash ISA market is worth £158 billion and by cutting the length of ISA transfers consumers could save up to £14.5 million, according to Consumer Focus.
However, chief executive of the organisation, Mike O’Connor, says: “The 15-day transfer guideline is very welcome, but it must be a benchmark for banks to improve upon – the bare minimum and not a target.
“It is also disappointing that the banks have set a deadline of May 2012 for putting interest rates on statements – consumers will be right to ask if it is reasonable to wait so long for such a basic change,” he adds.
Michelle Slade, spokesperson at comparison website Moneyfacts, says cash ISAs should not be the only products to benefit from the new guidelines.
“Many of the factors highlighted by the super-complaint are prevalent in other aspects of the savings market. Hopefully providers will take it on themselves to apply these reforms across the board,” she says.