Banks yield to improvements for cash ISA savers

Banks will have to clearly publish the interest rates on the face of cash ISA statements and will also speed up ISA transfers, after an investigation from the Office of Fair Trading (OFT).

The OFT investigated banks in response to a ‘super complaint’ from campaign group Consumer Focus.

The British Bankers’ Association, which originally described the Consumer Focus investigation as ‘misleading’, said the changes it had agreed to were ‘ a clear example of how the industry has been listening to the concerns of customers and consumer organisations'.

Under the changes, from 2012 all cash ISA statements will clearly show the interest rates paid. Currently just some 15% of customers receive statements that include their interest rate.

The maximum time taken to transfer cash ISAs between providers is to be cut from 23 to 15 working days.

Consumer Focus said the action was just a start and ‘a warning shot across the bows of the banks with the simple message that opaque business practices have no place in a modern customer-focussed banking sector’.

The campaigning body had also accused the banks of ‘bait pricing’, using ‘bonus’ interest rates to attract savers, where after the initial bonus period has finished there is little competition and the products often offer poor value. The OFT however concluded that introductory bonus rates were not causing substantial harm to consumers ‘since the existence of such rates is clear to consumers and they are informed when the introductory bonus rates end’.

Commenting on the changes agreed, Clive Maxwell, the OFT's senior director for services, said: ‘Whilst there is often strong competition between providers in this market to win new savings, the transfer of cash ISAs is taking too long and there is not enough transparency over interest rates. The voluntary changes announced today will give consumers a fairer deal and drive stronger competition.’