Bank complaintCorbis

The city watchdog, the FSA, is worried that expensive current accounts may be the next big mis-selling scandal, and is due to announce new rules on how they are sold any day.

It is worried that current accounts charging a fee and offering a raft of benefits may constitute a nasty rip off for those who are paying a small fortune for things they will never be able to use.


The accounts

These current accounts have grown dramatically over the last few years. Last year the Independent Banking Commission said around one in five of all current accounts charge a fee.

Which? says that around a third of people never use the benefits, and they come at an outlandish cost. The monthly fees don't seem particularly onerous, ranging from £5 to £25 a month. However, these quickly add up, and before you know it you're forked out £300 for the privilege of having a current account for a year. This is the cost of the Lloyds TSB Premier Account (the most expensive of the accounts). Other high cost options are Santander Premium Current at £20 a month and Halifax Ultimate Reward and Barclays Additions Active at £15.

In return for the fees customers get benefits like travel insurance and breakdown cover. They are told that the benefits are worth far more than the cost of the monthly fee, and persuaded that the package constitutes a massive saving.

The concerns

However, the FSA isn't convinced. It launched an investigation a year ago, and is due to announce its findings shortly, along with recommendations for how the market will need to change.

The Daily Mail has reported that the watchdog has already been putting banks under pressure to change the way the benefits are sold and improve some of the policies. It says Santander had to change the insurance cover for keys, identity theft and mobile phones when it emerged that they weren't as good as the stand-alone policies the bank sold.

However, The FSA remains very concerned about the way the policies are sold. At the moment sales teams are driven by hard targets to get people to sign up and have no duty to check whether they will be suitable products for these people. As a result they may well be sold to people who do not qualify for the benefits. So, for example, a 66 year old may have been sold the account on the basis that the worldwide travel insurance is makes it worth the money - but many of the policies are invalid for anyone over 65. Likewise they will not be covered if they have a pre-existing medical condition.

In addition, they may not have been warned to check if this simply duplicates cover they have elsewhere. So, for example, they may have breakdown cover with their car insurance or mobile phone insurance on their contents policy.

There are some hopes that the new sales rules will require suitability checks. However, at the very least, they will need to make the rules and limitations of the policies clear.