The Consumer Focus super-complaint argued that consumers are attracted with good headline rates, which disappear within months. Banks then fail to keep consumers informed about current interest rates and make transferring accounts an ordeal.
After a 90-day investigation, the OFT has secured agreement from the industry to:
- publish clearly the interest rates on the face of cash ISA statements - around 15% of customers currently receive statements that include their interest rate, but from early 2012 all statements will include this information, and
- revise industry guidelines on how long cash ISA transfers should take: down from 23 to 15 working days (which could save consumers up to £14.5 million) - this will come into effect from 31 December 2010.
Clive Maxwell, the OFT's Senior Director for Services, said:
'This is an important market for the 17.5 million consumers with £143 billion of savings in cash ISAs, and also for the wider economy since those savings support lending to many households and businesses.
'Our work over the past 90 days has revealed that, 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. We are grateful to Consumer Focus for bringing these issues to our attention.'
As well as the measures announced by the OFT to improve cash ISAs, Consumer Focus wants the banking industry to go further by:
- automatically paying consumers their new rate of interest after 15 days, no matter which provider is at fault for the delay;
- speeding up the timetable for printing interest rates on customer statements;
- ending the practice where money sits between banks earning no interest for the customer; and
- providing information on transfer times to the Financial Services Authority, which detail the performances of individual banks and building societies, so the best and worst performers can be clearly identified.
Chief Executive of Consumer Focus Mike O'Connor said:
'The OFT found that there are problems in transferring cash ISAs. This market is inefficient, secretive and stops people making informed choices about their life savings. The OFT have given banks a sharp reminder that ... ISA customers ... deserve a decent level of service and, to date, they have not been getting it.
'We live in the age of keyboards, not quills. ISA transfers should take days not weeks, certainly not over a month. For competition to work for consumers, they need to be able to switch simply, quickly and with the right information. The 15 day transfer guideline is very welcome, but it must be a benchmark for banks to improve upon - the bare minimum and not a target.
'It is disappointing that the banks have set a deadline of May 2012 for putting interest rates on statements - consumers will be right to ask if it is reasonable to wait so long for such a basic change.
'We urge everyone to make sure their complaints about ISAs go on the record - customer complaints will be an invaluable tool for keeping the banks' feet to the fire. At the moment if every saver moved onto the best deal, they would collectively gain billions. This is one industry where loyalty clearly doesn't pay.'