Packaged Bank Accounts: Time to Act

17 January 2017

By Mark Gossington and Stephen Carr

Alarmists were quick to label packaged bank accounts (PBAs) as ‘the new PPI’. While this remains to be seen, PBAs are the second most complained about product after PPI (the Financial Ombudsman received 44,244 complaints last year), prompting the Financial Conduct Authority (FCA) to take a closer look.

PBAs, which bundle together insurance and non-insurance benefits, are undoubtedly complex. The PBA rules added to the Insurance: Code of Business Sourcebook (ICOBS) in March 2013 require firms to establish and record customers’ eligibility for each of the insurances included in the package. They must also send out annual eligibility statements to make sure that the product continues to meet the customer’s needs. The FCA’s review (the Thematic Review 16/8) looks at how firms have implemented these rules, and how well they’re handling complaints.

Overall, the FCA feels that sales standards have improved in the area of assessing and recording eligibility, but added that there are still clear areas for improvement. The FCA’s mystery shopper exercise found that the sales process tended to be passive, which meant that insufficient information was often gathered to ensure a good match between customer and product. The process also often failed to confirm customers’ eligibility for products – with checks tending to concentrate on travel insurance products. 

This of course stokes up trouble – if customers aren’t making informed decisions and firms are not keeping adequate records, there is huge scope for mis-selling. And it is unlikely that firms will be able to defend themselves against complaints. All of which will sound horribly familiar to anyone with experience of PPI.

In another uncomfortable echo, the FCA also found that firms’ complaint handling around PBAs fell well below the required standards. While a fair outcome was achieved in 88% of non mis-selling complaints, this number nosedived to 44% for mis-selling complaints. The biggest problems seem to be in gathering evidence, failing to address the complaint points, and not giving the benefit of the doubt to the customer.

The biggest worry for senior management, though, will be that complaint teams often failed to follow processes and procedures. It seems that guidance was only adhered to in 22% of cases – however when it was followed, a fair outcome was achieved in 99% of cases.

The FCA also raised questions about the challenge provided to firms by the Compliance and Internal Audit functions. Many firms were unable to provide tangible examples of the challenges put forward by their second and third lines of defence, causing the regulator to doubt the effectiveness of these functions. The work undertaken in these areas seems disproportionally low, said the FCA, when compared with firms’ strategies and risk ratings for PBAs.

The FCA will soon review an additional sample of PBA mis-sale complaints which were received between March and May 2016. Given the new era of personal responsibility ushered in by the Senior Managers Regime, I wonder if those with accountability for PBA sales, complaints and governance oversight will sleep soundly at night?

It’s important to avoid the mistakes of PPI. Senior Managers need to react now to the FCA’s review, by making sure that sales and complaint handling standards are up to speed. We’ve already worked with several firms in this area by deploying teams to work as a ‘challenger cell’ alongside complaint handling functions. The challenger team helps spot improvements that can be made, working with the wider operational teams to make positive changes. To find out how we can help, contact

  View Mark Gossington's profile on LinkedIn    

  View Stephen Carr's profile on LinkedIn



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