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Current account and MPPI boosts for consumers

Current account and MPPI boosts for consumers

Category: Banking

Updated: 08/10/2009
First Published: 08/10/2009

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

Consumers have received a double helping of good news, as banks pledged to make current account costs more transparent, while the Financial Services Authority (FSA) and financial firms came to a final agreement on Mortgage Payment Protection Insurance (MPPI).

The Office of Fair Trading has announced that banks have agreed to a number of current account commitments, namely making costs more transparent and making the switching process more reliable and trusted.

This announcement follows a market study by the OFT last year, which concluded that transparency, switching difficulties and unarranged overdraft functions meant consumers felt the market was not working well for them.

Banks have agreed to introduce an annual summary of the costs for their current account to each customer, while also making charges more prominent on monthly statements.

A range of measures have also been agreed to improve the switching process, including: steps to reduce problems that arise from switching Direct Debits; reducing the impact felt by consumers when transferring Direct Debits; and a new consumer guide and website as part of an attempt to increase awareness amongst consumers of the automatic switching process.

"We welcome the industry's commitment to these important steps to improve the working of the current account market," John Fingleton, OFT chief executive, said.

"As consumers become more aware of the costs of their account and more confident in switching as a means to get better value, so banks will need to offer more competitive and innovative products and services to attract as well as retain customers.

"However, the third problem area we identified - unarranged overdraft charges - still needs to be resolved for the market to work in the best interests of bank customers."

Real progress has also been made on MPPI, with firms agreeing an industry-wide package of measures, including refunds of around £60 million for affected consumers. The move is a response to concerns that premiums have been increased, while levels of cover for consumers have been reduced, without clear disclosure made to customers.

Firms have agreed to: proactively refund increases in premiums, and reverse any reductions in cover, for customers who have experienced these changes to their policy in 2009; offer to reinstate policies where a customer had cancelled it within two months of an increase in premium or reduction in cover made during 2009; freeze premiums and cover for existing customers for at least the remainder of this year; and amend MPPI contracts to ensure that all customers are made aware of the circumstances in which firms have the right to vary premiums and cover.

"This is exactly what a financial regulator should be here for and we applaud the FSA's action. It cannot be right that firms change the terms and conditions of an insurance policy just as times get hard and when people are more likely to try to claim on it," Adam Phillips, chairman of the Financial Services Consumer Panel, said.

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