The UK FCA has announced its first actions under the new Consumer Duty rules, outlining a 14-point plan aimed at enhancing cash savings interest rates.
Following a review and a roundtable discussion with banks, the FCA has raised concerns about the slow increase in interest rates for easy-access accounts, with only 28% of the base rate rise being passed on to easy-access deposits by nine of the largest savings providers from January 2022 to May 2023.
In contrast, notice and fixed-term deposits witnessed a pass-through rate of 51% over the same period. The new rules now require firms with the lowest savings rates to justify their value by the end of August, and the FCA has pledged robust actions against non-compliant firms. Alongside this, improved customer communication is mandated, and large savings providers have voluntarily committed to enhancing efficiencies and exploring potential collaborations with Open Banking.
There has been considerable variance among firms in their pass-through rates, with smaller firms typically offering higher interest rates than larger competitors. The plan also involves measures for better informing customers about the best available rates, even if they opted out of marketing. In collaboration with the Information Commissioner’s Office, guidelines have been clarified for savings providers in this area.
Additionally, the FCA, along with the largest savings providers, is working to develop a savings dashboard to gauge consumer activity.
FCA executive director of consumers and competition Sheldon Mills said, “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.”
He further stated, “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.”
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