Packaged Bank Accounts Q&A: The Next PPI?

The revelation by Barclays that it has set aside £250m to cover the costs of redress on packaged bank accounts has raised the spectre of another big mis-selling scandal for banks.

:: What are packaged bank accounts?

We've known about the issue for several years but complaint volumes have risen sharply this year, bringing it into sharper focus.

Packaged bank accounts are simply accounts which charge monthly fees and contain products such as breakdown, mobile phone and travel insurance cover.

:: What is the problem?

The issue here is whether customers were mis-sold these accounts ahead of new rules for the industry, which came into force in 2013, which forced banks to give people more clarity on what they were paying for at the point of sale.

The big problem for the banks is that these offerings, and specific products contained in the bundle, may not have been suitable for everyone ahead of the regulatory shake-up.

:: How many people may be involved?

Research by the consumer group Which? in November last year suggested there were nine million packaged accounts in the UK, with their popularity having grown steadily year-on-year.

They emerged for the first time in the 1990s and evolved to become products costing up to more than £200 annually, with the bundle often including extras such as preferential currency exchange and savings rates on top of the insurance products.

:: Was I mis-sold?

Which? Money said it was clear from product assessments it carried out last year that while some accounts represented poor value for money, they were convenient and most offered significant savings on traditional insurance cover because of the scale of a bundle's cover.

But it said the crucial aspect of suitability was to ask whether you were making the most of the benefits in the package.

Mis-selling could have taken place in a number of areas including being too old for travel cover to be valid and being pressured into buying the product.

:: What do the banks say?

The British Bankers Association said while there were clearly mistakes made in the past, the industry had responded to concerns by implementing the new rules.

Its spokesman Rob Watts said he believed an increase in complaints - currently standing at an average of 1,000 per week according to the Financial Ombudsman Service (FOS) - may be down to increased activity among claims management firms now PPI complaint volumes had eased off.

He told Sky News: "There has been a big change in the way these products are sold ...you now have to have all the bells and whistles explained to you at the point of sale when you take up a packaged account.

"You also get an annual statement setting out those benefits, seeing if they are still working for you.

"It's very important customers do look. Talk to your bank."

:: Is this going to be as big as PPI?

The FOS confirmed that 80% of the complaints it was receiving were made by claims management companies and it was recently finding in favour of the complainant in about 10% of cases only.

It said packaged accounts were "not the next PPI" scandal, despite obvious examples of bad practice.

The FOS advised consumers to ensure any complaints they submitted addressed their specific concerns as many claims firms tended to use generic forms.

You can read its advice on eligibility and making a claim HERE