Defaqto calls for a further extension to the Banking Code

The impending changes to the Banking Code address many of the concerns that have been raised in recent times and Defaqto applauds these initiatives.

However, in one particular respect, Defaqto would like to see a further extension of the Banking Code. This relates to ensuring that easy access savings accounts that levy interest penalties on withdrawals are advertised in such a way that the consumer can instantly understand what type of account it is.

While the revised Banking Code (‘Code of conduct for the advertising of interest bearing accounts’) will ensure that the conditions on withdrawal are stated in each account’s terms and conditions as well as in the proposed savings summary box, consumers may still not grasp the full extent of the penalties built into these accounts.

For this reason, Defaqto suggests that these accounts, which have proliferated in recent times, be labelled as ‘instant access penalty accounts’ or ‘easy access penalty accounts’.

This would be a step beyond the insertion of withdrawal penalty conditions in the proposed savings summary box and would enable consumers to register ‘at a glance’ the type of account being proffered.

David Black, Principal Consultant for Banking at Defaqto said: “Some providers of these accounts have started referring to them as “discipline” accounts on the basis that they’re designed to deter withdrawals in all but emergencies. On the positive side they do offer good value for depositors who know they will not need to access their money. Other savers, needing to make withdrawals but aiming to minimise their interest penalties, would do well to close such accounts on the day that least interest will be lost, rather than making partial withdrawals. In effect, this would treat these accounts as flexible term accounts with a closure option each month.”