It's looking more and more like paid-for current accounts could be the next mis-selling scandal

Banks are running scared.

The headlines are pretty stark. Paid-for currents accounts could become the next bank mis-selling scandal, according to almost identical headlines in the Daily Mail and the Telegraph. The source for this gloomy prognosis is the annual report from the Financial Ombudsman Service (FOS). According to the FOS, it has received a record number of complaints from customers unhappy with their paid for current accounts or packaged accounts.

So just how many people did complain about their packaged current account  - or added value account (AVA) as banks prefer to call them - in the past 12 months? The answer is the grand total of 1,629. Not good, but hardly on the scale of PPI claims. In the last year, the FOS received a staggering 379,000 complaints about PPI. To date, UK banks have required to set aside more than £12bn (and counting) relating to PPI claims that now exceed 700,000 complaints. To put the AVA figure in context, taking into account multiple and joint current accounts in the UK, the total number of current accounts is about 60m. Of these, somewhere around 17 per cent are AVA’s.

In calculating how much these accounts are worth to the banks, the figures do start to get interesting. Research from the consultants Defaqto shows that since 2008, the average monthly fee for an AVA has shot up to £15.11 from £12 four years ago. With 10.2m packaged accounts costing an average of £181 a year to run, this product is worth around £1.85bn to the banks in fees. These are fees that UK banks can scarcely afford to put at risk by another bout of mis-selling They would surely not be so daft as to put this revenue stream at risk Or so one would hope.

Since November 2009 there have been more packaged accounts available than standard, free in-credit current accounts. By April this year, there was 68 different AVA’s on offer on the UK market compared to 63 free-if-in-credit current accounts. But in the past few months, a number of UK banks have been keen to distance themselves from AVA’s. The new kid on the UK banking block, Metro Bank, ditched its £12.50 per month packaged account offering called Metro Bank Plus last December.

Meantime, market leader Lloyds Banking Group – it has a market share of around 1 in 3 AVA’s - pulled its AVA accounts from sale in its branches and over the phone from the start of the year. At the time, Lloyds said that sales suspension would be for what it called a "short period". Almost six months later, to the glee of the more excitable tabloid press (in particular the Mail), sales of the product remains suspended in-branch.

One might reasonably ask: how long does the bank require to re-train its branch staff not to run the risk of mis-selling a packaged account? Elsewhere, Santander launched what comes as close you will get to a genuinely innovative new bank product, the Santander 123 current account. It charges customers £3 per month to run and offers a bundle of benefits, such as cash-back on certain purchases.

Do not however dare to suggest to Santander that the 123 account is an AVA. The party line from Santander is that it does not now offer packaged accounts. The FOS has certainly stirred things up suggesting that some bank staff have switched current account customers to AVA’s without their knowledge, with many only becoming aware of the switch when they check their current account statement. It is also claimed that AVA’s have been sold to customers for whom such a product is not appropriate.

A number of banks have also been running scared when asked to discuss their strategy towards selling packaged accounts: Barclays being a notable exception.

In summary, it is far too early to be rushing out headlines suggesting that AVA’s are the next major banking scandal. The regulator, the Financial Conduct Authority, is already on the case and now requires banks to send AVA customers a yearly statement so that folks can see if they are benefitting from such accounts. If any banks are dumb enough to dare to mis-sell AVA’s in the future, they will be hung out to dry – and will have nobody but themselves to blame.

Meantime, just in case you are tempted to ‘upgrade’ your ‘free’ current account to any product containing any word such as Gold, Platinum, Select, Privilege, Ultimate etc: do your sums carefully before you sign up. And read the small print - just in case it is not for you.

 

Photograph: Getty Images

Douglas Blakey is the editor of Retail Banker International

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Theresa May wants a Global Britain? Then stay in the single market

The entrepreneur Lord Bilimoria argues the Prime Minister risks both the prosperity and reputation of the UK. 

Since coming to the UK as a student in the early 1980s, I have witnessed the shattering of its glass ceiling and the birth of one of the world’s most enterprising nations. Much of this progress is now under threat due to the great uncertainty Brexit is causing.

It has been six months since the referendum, and we are still presented with no clear strategy except a blind leap of faith out of the single market. By continuing to pursue a closed and inward-looking Brexit, Theresa May risks both the prosperity and reputation of this country. 

Last week I joined with thirty other entrepreneurs and business leaders in urging the Prime Minister to keep Britain within the EU single market. In the coming months Mrs May will face having to make a trade-off between immigration control and loss of single market access. The decision she makes will determine whether we retain much of our economic strength. 

That is why I was disappointed to see May’s most recent comments simply reinforcing the message that the government is pursuing a "hard" Brexit. Over the weekend her big interview sent the pound plunging – yet again. 

It is clear the government is solely focused on delivering stricter immigration regulation, regardless of whether it leaves Britain stranded outside the single market. To fall into the trap of calling the PM "Theresa Maybe" masks the decisive nature of her emerging strategy – which is to head for the hardest of exits.

We know that neither Council President Donald Tusk nor chief negotiator Michel Barnier will accept access to the single market without freedom of movement being part of the deal. This is incompatible with the vision set out by the government.

Yet, movement and access to the single market are vital to the future interests of British business. The PM must do more to reassure those set to be affected. We are currently part of a 500m-strong single market; this is good for British business. Although I believe the whole of Europe needs to reform the current free movement of people, not least for security reasons, we nevertheless must continue to have the ability to move freely within the EU for tourism, business and work.

It is becoming unequivocally clear that the PM is willing to pay any economic price to achieve stricter immigration controls for political gain. Driven by the fear that the far-right will use immigration in future election battlegrounds, the issue of immigration is undermining our ability to negotiate an exit from the EU that is in the best interest of businesses and the nation as a whole. 

The government’s infuriating failure to prioritise continued movement of people means we are set to lose a hugely competitive edge, reducing access to talented employees, and undermining the UK’s rich history of an open, diverse, and welcoming nation.  

To achieve the government’s absurd immigration control, we will have to leave the European single market. In doing so 44 per cent of our exports, the current percentage that go to Europe, will be jeopardised, as they will no longer have free access to their original markets. 

In tandem with an exit from the world’s largest single market, British business will also lose access to one of the strongest international talent pools. This has the potential to be even more devastating than the forfeiture of markets and trade.

Access to skilled workers is critical to future success. As a nation we have the lowest level of unemployment in living memory with less than 5 per cent currently out of work, and that’s in spite of 3.6m people from the EU working in Britain.

Britain will continue to need the expertise that free movement currently provides, regardless of whether Brexit happens or not. You cannot simply replace the skilled doctors, nurses or teachers living and working here overnight. 

The focus on immigration has also strayed into more dangerous territory with the government persisting in including international students as immigrants when calculating net migration figures, whilst having a target to reduce net migration to the tens of thousands. The PM’s insistence on this policy not only stifles encouragement of talent flows, but also sends an incredibly negative message to the international community. It is a policy that I have continually called on the PM to change and I will continue to do so.

Our competitor countries, the United States, Canada, and Australia, do not categorise international students as immigrants and, in fact, they also provide generous incentives to stay in their countries to work after graduating. In comparison, we removed our popular two year post-study work visa in 2012.

Brexit poses an increasingly dangerous reality that we are destined to be viewed as an inward-looking, insular and intolerant nation. That is not the Britain I know and love. That is not the Britain that has attracted enterprising individuals. The UK needs to establish itself once more as an outward-facing nation that welcomes international talent and entrepreneurship. This starts with retaining membership of the single market.  

Lord Karan Bilimoria is a leading British businessman and the founder of Cobra Beer.