Packaged bank accounts are those accounts where customers pay a monthly fee to hold the account and in return for this they get certain perks.
These perks might be mobile phone insurance, travel insurance, breakdown cover and other such-like things. The fees for these perks can be as much as £300 per year and, of course, the banks love the packaged accounts because they are big money-spinners.
Now, however, the Financial Services Authority is clamping down on how the packaged accounts are sold. This is because some of the extras and perks included in them may be totally unsuitable for some customers. For instance, a packaged account may include travel insurance but there may be a clause in there that may prevent certain customers from claiming on it.
So the FSA has published rules which will force the banks to check whether customers are eligible to claim on all the insurances on offer in the packaged account before selling it to them. If a customer is not eligible to claim on a certain insurance then the bank must inform them.
The FSA director of policy, Sheila Nicoll, says that they will be monitoring closely the sales of packaged accounts and enforcing the new rules so that customers know what they are buying and the limitations of the product. About 150 complaints are received each year by the Financial Ombudsman about packaged accounts.
This figure, however, could be much higher in reality because most complaints are linked to the insurance policies sold as part of the account. Over the past five years, the number of people with packaged accounts has doubled and there are now seventy different types of these accounts on sale in the UK. Typically, two of the biggest banks, HSBC and LTSB, refused to say how many of their customers held packaged accounts.