Savings providers will soon have to make sure customers are made aware of newly available interest rates, as well as inform them of deals that could leave them better off, according to new rules by the FCA.
Nikhil Rathi, chief executive of the Financial Conduct Authority (FCA), wrote to the Treasury Committee ahead of a new consumer duty, which is due to come into force at the end of July.
The new duty will require financial firms to put customers at the heart of what they do, setting higher and clearer standards.
In the letter, Mr Rathi said: “We welcome that many firms have acted in advance of the consumer duty to simplify their product ranges and equalise rates between on and off-sale savings accounts.
“We will monitor firms’ actions to comply with the duty and take appropriate steps, including enforcement action if appropriate, if we find they are consistently not providing good outcomes for their customers.”
Mr Rathi said the higher standards mean “we will expect firms to have a strategy to ensure their customers are adequately informed of available rates across their product set and how they may benefit from switching to an alternative”.
He said firms will need to go further than simply notifying a customer when a product matures in order to be compliant, adding: “This includes identifying groups of customers who may be better served by a higher rate product and considering what additional steps they can take to support these customers in switching where appropriate.”
This comes following concerns raised by the Treasury Committee that borrowing costs are rising faster than savings interest rates, which has seen it press providers on the issue.
According to figures released by Moneyfactscompare.co.uk on Tuesday, the average two-year fixed-rate mortgage has hit 6.78 percent, while the average easy access savings rate rests at a more modest 2.62 percent.
Mr Rathi said: “The consumer duty is requiring a significant cultural shift in how some firms approach the value they offer in their savings products. If firms find that their products do not meet the needs of customers or deliver fair value, we expect them to take remedial action.”
He added: “We are clear, however, that our rules do not operate as a price cap or floor, nor prevent innovation in financial services.”
The duty will come into force on July 31, 2023, for new and existing products or services that are open to sale or renewal. It will apply from July 31, 2024, for closed products or services.
Commenting on the correspondence, Treasury Committee chairwoman Harriett Baldwin said: “If the high street banks continue to pay poor savings rates on their instant access accounts, they should make sure their customers know that better rates are available.”
The committee also published letters from bank bosses, responding to its questions.
Matt Hammerstein, chief executive of Barclays UK, said the firm recognises that maintaining strong alignment with the duty will require more effort to ensure it delivers “fair value” to the market, and has “refreshed” its policies, standards and processes.
HSBC UK chief executive Ian Stuart said in his letter that the bank has “designed a broad suite” of savings products to support different goals, all of which treat new and existing customers in the same way concerning interest rates.
Charlie Nunn, group chief executive at Lloyds, wrote: “We take our obligations under the consumer duty seriously and have made a number of significant enhancements to support our customers. We will continuously improve our products, services and journeys beyond July 2023.”
NatWest group chief executive Dame Alison Rose said: “Improving the overall financial resilience of our customers is a priority for NatWest and we have been working for some time on products that promote good savings habits. Our pricing principles mean that we do not discriminate between new and existing customers.”
For all the latest Business News Click Here
For the latest news and updates, follow us on Google News.
