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Packaged current accounts: Was yours useless in the pandemic?

There were more than 25,000 complaints about packaged bank accounts last year as Britons were left with monthly fees for perks rendered useless by the pandemic.

Customers of the likes of Halifax, NatWest and Nationwide Building Society are charged upwards of £10 a month for additional benefits like breakdown cover, travel and mobile phone insurance and fee-free spending abroad.

However, many have been ‘checking their accounts over lockdown and finding out they are being billed for their account and the benefits aren’t applicable to them’, according to Martyn James, from complaints website Resolver. 

Have you read the terms and conditions? Packaged bank accounts offer add-ons like breakdown cover and travel insurance but they may not cover you 

Although complaints are down from 39,152 in 2018 and just over 30,000 in 2019, volumes remain ‘really, really high’, James added, with the focus increasingly switching to the underlying benefits.

‘Many of the accounts have health and travel insurance policies which stipulate they do not currently cover coronavirus, although customers have previously found themselves fobbed off when trying to seek redress through these accounts for cancelled trips.

Some accounts, particularly Nationwide’s £13-a-month FlexPlus packaged current account, have also gotten less generous in recent years, as This is Money has reported.

However, at the same time, banks have refused to reduce the fees they charge customers, or even compensate them for services they could not use due to the pandemic.

Last year for example, insurer Admiral gave £25 back to all policyholders in recognition of the fact there were fewer cars on the road, while LV made £30million available to car insurance customers last May who were struggling financially.

Andrew Hagger, founder of the personal finance site Moneycomms, said: ‘You could argue that banks could have made a gesture to customers with travel insurance and car breakdown cover by offering a partial refund.

‘It makes sense as insurers are taking less risk and are able to pass some of cost savings to customers, although I don’t expect any banks to do similar.’

Complaints about packaged bank accounts 
Year  Number of complaints 
2020 25,043
2019  30,769 
2018  39,152 
Source: Resolver 

Complaints overall about current accounts made-up 23 per cent of all 2.19million complaints about financial firms in the second half of 2020, according to figures released last week by the Financial Conduct Authority.

And travel insurers did not escape consumers’ ire either. There were 4,939 new complaints to the Financial Ombudsman Service between July and December 2020 about travel insurance, with a 157 per cent rise in complaints between April and June and July and September.

This was largely down to insurers’ frequent refusal to pay out for holidays cancelled and curtailed as a result of the pandemic. 

Packaged accounts continued to be sold though, rebranded as a “premium service” with the focus on the benefits. That’s why we still have so many cases. People have been checking their accounts over lockdown and finding out they are being billed for their account and the benefits aren’t applicable to them.

The FCA has repeatedly called on the industry to treat consumers fairly, while consumer group Which? said the figures demonstrated there was a widespread belief travel insurers had not done a satisfactory job in resolving people’s problems.

Martyn James added: ‘Back in the early 2000s, mis-selling of packaged accounts was rife. 

‘It was virtually impossible to go in to a bank and not have someone try to flog you one. 

‘Sales targets were bonkers and many people were just shoved on to the accounts to meet targets regardless – to the annoyance of many, many people.

‘This wasn’t sustainable and the regulator clamped down. Packaged accounts continued to be sold though, rebranded as a “premium service” with the focus on the benefits. That’s why we still have so many cases.

‘For example, if you go over 70 then travel insurance is unlikely to cover you.’

However, Andrew Hagger doubted such accounts were still being mis-sold. 

He said: ‘If people aren’t happy that they are paying for a product they don’t use then there’s nothing stopping them cancelling and asking to revert to a standard current account.

‘The excuse of not realising what they are paying for doesn’t really wash any more, as for many years now customers have received an annual reminder of what’s included in their packaged account.

‘Many of the complaints are probably driven by claims management companies looking for a new payday post-PPI.’

His view appears borne out by FOS data which revealed just 5 per cent of cases involving packaged bank accounts were upheld in consumers’ favour in the final three months of last year, suggesting that on the whole, banks are doing nothing wrong. 

The average uphold rate was 28 per cent, while travel insurance complaints were upheld 38 per cent of the time.

Some people however have complained to Resolver to say their bank has continued to debit them for a packaged account even after they have been asked to stop.

Among the highest-rated packaged bank accounts, according to the financial information company Defaqto, are Bank of Scotland’s Vantage account, Lloyds Bank’s Platinum account, Nationwide’s FlexPlus account, NatWest’s Reward Platinum account and Virgin Money’s Club M account. 

Defaqto’s Katie Brain said: ‘Packaged accounts can offer customers some really useful benefits. 

‘However they must be aware that the terms and conditions which come with these accounts need to be carefully considered for restrictions and limitations that are stated in the small print. 

‘Also, some packaged accounts come with a monthly or annual fee so you need to weigh up whether the incentives offered are worth paying that charge. 

‘In addition, these accounts usually require customers to make a minimum monthly deposit.’

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