Bank staff failing on financial compensation scheme

We tested bank staff’s knowledge of the Financial Services Compensation Scheme (FSCS) and were shocked to find some customers could be left significantly out of pocket if they followed their banks’ advice.

The FSCS is designed to compensate consumers if a bank or building society goes bust, but our mystery shopping reveals that staff are routinely giving wrong information about the scheme meaning people’s savings may not be fully protected.

We tested staff in 13 of the biggest providers, posing as new customers with £100,000 to deposit into a savings account. Worryingly not a single member of staff proactively told us about the scheme, or warned us that only £85,000 of the £100,000 total would be protected in the event of a bank’s collapse.

We also found:

  •  Even when prompted, at most banks and building societies not all staff could tell us the correct amount protected by the FSCS – several admitted they had no idea and a third of HSBC staff got this wrong.
  • Many staff didn’t explain that if you have savings with more than one member of the same banking group, the full amount may not be covered – only one provider, First Direct, managed to score more than half marks on this question.
  • Overall HSBC came bottom with a score of just 51% and Yorkshire Building Society came top with 88%, followed by Britannia (82%) and Halifax (81%).

Consumers are confused about the structure of banking groups, so Which? is calling for the FSCS to cover individual brands, which people recognise, rather than authorised provider.

Richard Lloyd, Which? executive director said:

“It is inexcusable that bank staff can’t give customers basic information about the compensation scheme if their bank goes bust. In the event of a collapse, this bad advice could cost people many thousands of pounds from their life savings. We hope this is a wake-up call to the banks that they need to improve staff training.”

For advice about the FSCS visit the Which? website

Notes to Editors

1. In early 2014, we made 156 anonymous calls to 13 of our biggest banks and building societies (each provider was called 12 times) and asked five questions about saving £100,000:

  •  Advice on which instant access savings account to deposit £100,000 – with no specific prompting about savings protection limits.
  • Advice on what the savings protection limit was, saying we’d heard about a scheme on the radio.
  • Will having savings elsewhere affect the level of protection?
  • What happens if you have cash deposited in a joint account?
  • Are cash Isas treated the same under FSCS scheme as other savings products?

2. Summary of which bank staff knew the most about the FSCS:

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3. Summary of Financial Services Compensation Scheme (FSCS) rules:

  •  £85,000 of savings are protected and for investments it is up to £50,000 (investment compensation is only paid on claims for losses caused by negligent management, misrepresentation, fraud or bad advice against a firm that is insolvent – not simply losses due to poor performance).
  •  The £85,000 limit applies per banking license, now known as Prudential Regulation Authority authorisation rather than per banking brand. This could mean that if you have savings with more than one member of the same banking group, the full amount you have saved may not be covered. For example, if you have savings with The Co-operative Bank, Britannia and Smile, the total amount covered would be £85,000 as these brands share the same authorisation. Conversely RBS and NatWest are part of the same group, but retain separate PRA authorisations.
  •  If you have cash in a joint account, then protection applies per person, so it is doubled to £170,000.
  •  Savings accounts, cash Isas and current account deposits are all protected under the FSCS, but the limit is still calculated per authorised provider not per account.

4. We welcome moves at European Union level to amend the Deposit Guarantee Scheme Directive to protect temporary high balances, such as the proceeds of a house sale. This would give greater protection to people who have more than FSCS limit of £85,000 in their account for a short period of time.



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