James Daley

By James Daley

New figures from the Financial Ombudsman Service show that the number of complaints it received about fee-charging bank accounts (or packaged accounts as they're known in the industry) almost trebled in 2013, to over 5,600. Many of these were people complaining that one of the insurances in their package didn't pay out when they needed it to. While others were complaints about not being automatically upgraded to a fee-paying account without their knowledge.

What's most depressing about this story is that it should be old news. Packaged account mis-selling was highlighted as a problem four or five years ago by the consumer group Which?. And as recently as two years ago, the regulator asked banks to write to customers of packaged accounts to check that they understood them and were getting good value from them.

Just last year, the regulator followed up with new rules which govern the way these accounts are sold - putting a greater responsibility on banks to ensure that the insurances are suitable for the customers who are buying them.

All this should have been enough to spark the industry into action. The fact that the situation is getting worse, not better, gives some insight into the sales-driven culture that continues to prevail in many of the largest banks. Around 5,500 complaints to the Ombudsman is likely to equate to tens of thousands of complaints about packaged bank accounts in total. The Ombudsman is the last resort, and most complaints never make it that far.

Final warning

I believe that the things are improving when it comes to the sales culture in our banks. The regulator has said as much. But there's less to be positive about when it comes to the quality of packaged bank accounts. As I said it my blog about M&S last week, Nationwide is one of the only banks to offer a packaged account that looks like really good value. Most others include insurances with cover levels that are too low - for example, mobile phone insurance that won't cover the full cost of a modern smartphone - or they're simply too expensive.

Nationwide is leading the way in this market - and if just one or two more could create compelling products, perhaps the rest would follow. For now, most packaged accounts remain poor quality, and are sold poorly. Let's hope these latest complaints figures are the last warning that the industry needs before this balloons into a widespread mis-selling scandal.