Watchdog wants to stop lazy bank customers losing interest

Tim Wallace
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THE NEW City watchdog is looking at ways to nudge consumers to take better care of their finances, regulatory chief Martin Wheatley said yesterday, arguing they often fail to act in their own interests.

He complained most customers who open products to take advantage of bonus rates never switch when the high rate expires, losing out in the following years.

“Teaser rates attract consumers then exploit inertia – are customers like the proverbial frog in water… never jumping out as the water boils?” he said. “Around 60 per cent of consumers stay on with the products even when interest rates drop down to 0.001 per cent.”

He also argued teaser rates can act as a barrier to entry as only established players can afford to offer the introductory bonus rates, holding down competition and harming customers in the long run.

The Financial Conduct Authority (FCA) will not ban the products, but is instead studying how changing the way the products are presented can persuade more customers to switch providers when the bonus rate runs out.