Packaged Bank Account charges are basically fees that are applied to a Banks’ current accounts, charged on a monthly basis. The Bank charges this monthly fee and provides the client with a “package of benefits” which can include travel insurance, roadside assistance and also cheap rate entrance to various attractions throughout the Country.
A majority of the Packaged Bank Accounts have varying different packages, and some include these styles of benefits, but others, for instance, just have benefits which secure a cheaper rate on a personal loan or credit card.
The main reason why Packaged Bank Account charges are being looked at in depth by the Financial Conduct Authority (FCA) (and which we have seen a growing number of claims in relation to the mis-selling of the Packaged Bank Account charges) is that there are a lot of grey areas in relation to how the Banks promoted these particular accounts. The FCA have suggested that, rather than actually promote and offer the account to individuals who would benefit from the various benefits of the facilities, they have been sold to anyone who has an account with the Bank. This is borne out of the fact that at present there are 11 million Packaged Bank Account facilities throughout the Country and, over recent years, this number has certainly doubled when bearing in mind all the accounts that have been closed.
The mis-selling takes place in relation to Packaged Bank Account charges when the Bank sells and promotes the product in such a way that it does not comply with the rules and regulations laid down by the financial institutions regulator (in this case the FCA). The benefits of the particular Packaged Bank Account have not been strong enough to justify the way that the Banks have sold the particular product and the way that the Banks have promoted the facility, by not offering a free account. This meant that individuals were not given a choice (which they should have had) over whether to take the facility or not.
The Packaged Bank Account facility itself charges a monthly fee which can range from anywhere between £10 and £30 per month. As stated above, it can reflect a variety of so-called benefits ranging from cheaper “away days” through to mobile phone cover (of course, this cover is in place only as long as you register the phone with the prescribed data centre contained in the small print of the facility) or cheaper rate loans are offered to clients who have accounts where for which they pay each month. However, the accounts are normally only provided to people with a certain degree of income. These cheaper rate facilities are also available to anybody, providing they have this income. Therefore, again the facility itself is unnecessary.
Lloyds Bank started charging facilities in the 1990s by opening up their Classic account at a fee of £8 per month which offered a variety of benefits, but mainly these were account based, such as credit interest and reduced interest on overdraft facilities. The client therefore had some degree of benefit that could be monitored and utilised. Also, clients had the opportunity to have a “fee-free” banking account and were not penalised in doing so. However, as is normal, the Banks became greedy and used the Packaged Bank Account facilities as an excuse to drive home their absolute desire to make sure that fee-free accounts were (not necessarily a thing of the past, as they are required by Law to offer them) shuffled to the wayside, converting many people to the fee-based account in order to generate considerable revenues. I will leave everyone to get their calculators out to work out how much on average, say £15 per month is times by 11 million. Therefore, you can work out exactly how much the Banks are earning, just on this particular type of account.
The Banks have always hated offering free facilities and have always taken the opportunity to cross sell to anybody who has a free facility. However, with the Packaged Bank Accounts, the Banks are charging directly for the operation of the current account and the income generated is going some way to negate the lost income from the other various mis-selling scandals that the Banks have become embroiled in, such as mis-sold Payment Protection Insurance and Endowment Policies.