The FCA’s Consumer Duty clamps down on unfair savings rates
The Financial Conduct Authority (FCA) is clamping down on banks and building societies offering disproportionate interest rate rises to savers following a review of the cash savings market earlier this month.
The FCA sets out expectations for fair savings rates
The UK financial watchdog’s 14-point plan of action, which has been delivered in tandem with its Consumer Duty deadline, seeks to ensure that banks and building societies are offering the most appropriate interest rates on their savings accounts.
Its recent analysis of the market, which included a roundtable with the UK’s largest banks and building societies, uncovered that while there has been a promising rise on the interest incurred by savings accounts, the rise has not been proportionate for easy access accounts.
Its latest announcement suggests that nine of the UK’s biggest savings providers only passed through 28% of the base rate rise to their easy access deposits between January 2022 to May 2023.
However, this was not the same for notice and fixed term deposits, with the same nine providers passing through 51% of the base rate during the same period.
This imbalance has also been observed between firms of different sizes, with larger firms offering lower interest rates than their smaller competitors.
With the FCA on the warpath against unfair deals and firms failing to act appropriately, its latest plan cements that it’s more than ready to take action.
Firms will have until the end of August this year to justify how their savings rates represent fair value, especially for those offering the lowest rates.
Stepping up and speeding up
Another interesting stipulation of the watchdog’s 14-point-plan is that it requires firms to “step up” their communication channels with customers. Customers must have access into what all their options are and firms must be able to demonstrate the effectiveness of their communication campaigns.
This is a major point of focus for the regulator, and it has even collaborated with the Information Commissioner’s Office to clarify how savings providers could inform their customers about the best available rates, even where they have opted out of marketing.
“We want a competitive cash savings market that delivers better deals for savers, where interest rates are reviewed quickly following base rate changes and firms prompt savers to switch to accounts paying higher rates,” confirms Sheldon Mills, the FCA’s executive director of consumers and competition.
“We welcome the progress that has been made so far but this needs to speed up. We will be using the Consumer Duty to ensure this is the case – with firms required to prove to us that they are offering their customers fair value.”
Mills adds: “We continue to urge savers to shop around to take advantage of the increasing number of better saving deals available.”
