A fifth of current account holders have packaged bank accounts and now millions of customers could be entitled to thousands of pounds each in compensation for allegedly being mis-sold these fee-charging current accounts.
Banks like to call them names like “Added Value” or “Premier” accounts. They can cost as much as £25 a month (£300 a year) depending on the bank and individual package. And the banks claim that they give you great benefits while saving you money.
But, many customers with a packaged account are unable to use benefits such as travel insurance, breakdown policies and mobile phone cover that are included in the deal.
The packages are often sold as upgrades to a basic free account but very often, the benefits are useless. Here are some examples –
- Pensioners find that they are excluded from travel insurance policies due to their age.
- Drivers discover that they have simply duplicated insurance they already have.
- And many people with health problems have been unable to claim on insurance because of exclusions that have not been explained.
Packaged bank accounts have long been criticized by many financial commentators, and industry research suggests that at least a third of those holding one have not used any of the extras they have (and are) paying for.
Could Package Bank Accounts be the New Mis-Selling Scandal?
The packaged bank account issue follows the scandal concerning the mis-selling of 16million policies for payment protection insurance (PPI) to cover monthly repayments on credit cards or loans if a customer loses their job or becomes ill.
So, an announcement that millions of people who were mis-sold these policies will share up to £1.3bn in compensation suggests that it just may be.
Banks sold the policies to people who did not need them, did not want them or, in many cases, did not even know they were buying them.
With one in five adults holding a packaged bank account, it is estimated to be worth £1.5bn a year to the banks and building societies.
And now the Financial Ombudsman Service is receiving an ever increasing rise in the number of complaints concerning packaged bank accounts. In particular from those people who were sold insurance for which they were subsequently not unentitled.