Rip-off bank accounts fuel 27 per cent rise in payouts

FURIOUS customers are battling for compensation after being tricked into signing up for expensive current accounts by their bank.

Figures from the City watchdog yesterday showed payouts to people who protested about their bank accounts and credit cards have soared by 27 per cent.

Although the Financial Conduct Authority doesn’t break the figures down, the surge has been fuelled by disputes about packaged accounts where customers pay a monthly fee for extras such as travel insurance or mobile phone cover.

But some who have been sold the accounts don’t need the extras or can’t use them, for example because of age limits on travel insurance.

The figures prompted one leading consumer campaigner to describe the scam as the second biggest mis-selling scandal of the last decade after payment protection insurance (PPI). According to the FCA, banks dished out £269,000 to disgruntled customers in the second half of last year, a 27 per cent jump from the first half of the year. This is despite a 10 per cent fall in complaints about current accounts overall to 454,276.

But banks are braced for a major backlash from customers, having set aside more than £1billion to compensate customers for missold packaged accounts so far.

Of Britain’s 62million ‘live’ current accounts an estimated 14 per cent are paid for, with charges ranging from £6 to £25 a month. But consumer campaigners say accounts are sometimes sold to the elderly who end up paying for worthless insurance as policies may have an age limit of 70.

Other customers have been upgraded to a fee-paying account without their knowledge. Experts said customers are typically receiving payouts of between £300 and £1,000, but some have received more than £3,000.

Martin Lewis, founder of website Moneysavingexpert.com, said: ‘After PPI, this is the biggest financial scandal of the last decade. These deals can be great for people who made an active decision to buy one as a way of getting insurance cheaply.

‘The real problem comes if a branch salesman said you needed one or had to have one. If this happened it is very likely you have been ripped off and could be due all your money back.’ The independent Financial Ombudsman said packaged accounts are the second most complained about product it sees. It received more complaints between April and December – 32,720 – than during the whole of the previous year.

Lenders have also been hit with another surge in PPI complaints which jumped 6 per cent to 932,298 in the second half of last year. Almost £2billion was paid out for everything from mis-sold pensions to mortgages. Around £1.6billion of this was for PPI.

Banks have set aside more than £30billion to compensate customers who bought PPI.

In total customers l odged 2.11million complaints against financial services companies. Barclays was the most complained about with 279,561 complaints.