Savers will now be told if their bank plans to slash interest rates under new rules from the Financial Services Authority (FSA).
Banks will face action from the FSA if they do not abide by the new set of rules surrounding interest rates, which came into force on May 1.
From now on if a bank or building society wants to change rates that could potentially affect current accounts or savings accounts the customer must be told prior to the cuts and offered the chance to move their money beforehand. They must also warn customers if their introductory bonus rate is due to come to an end.
The new regulations, which cover most easy access accounts, notice accounts and cash Isas, were first announced last November as an attempt to tighten reins on banks guilty of misinforming their customers.
Under regulations banks will have to give customers at least two months’ notice about any interest rate reductions on current and instant access accounts.
According to the British Bankers Association and Building Societies’ Association if the rate is cut by more than 0.25 per cent and the saver has £500 or more in the account they should expect between 14 and 30 days’ notice of the change.
Dan Waters, the FSA’s director of conduct risk, said: “New regulations will put banking customers in the driving seat by setting down clear standards that people can expect from their institution, like speeding up payments between accounts, adequate notice of changes in terms and conditions, and smoothing the procedure for querying an unauthorised or unexpected transaction.
“If firms fall short of these standards or fail to treat their customers fairly, the FSA will take action.”
Although the new rules were first announced last year they have been introduced gradually with the latest banking reforms coming into place last week. Amongst the other rules the FSA has also stated that banks must:
- Refund unauthorised transactions in full unless they can show some good reason why they need to investigate the claim.
- Add interest to funds in any current and instant access accounts from the moment that the bank receives the funds from the consumer. This was extended to all accounts on 1 February 2010.
- Refunded a debit made from a customer’s credit or debit card, or a direct debit, if it is more than they could reasonably have expected within 10 days, unless they can provide evidence to justify refusing the refund.
However, banks do not have to let you know if your rate rises by less than base rate. Nor do they have to inform you of any change to a rate that is linked to Bank of England base rate.
© Fair Investment Company Ltd