Wednesday, 31 March 2010

Isas prove why trust is in such short supply

The banks came in for a good bashing from the three Chancellors on Monday night. And yesterday brought yet more evidence of how richly deserved the public abuse seems.

The Consumer Focus report on cash Isas makes depressing reading. It is very hard to defend the banks against the charge that they shamelessly exploit ignorance and inertia to give millions of their customers a very bad deal. The banks make good use of “bait and switch” tactics with other savings products, enticing customers in with high teaser rates then reducing them once the fish is hooked. With cash Isas the behaviour appears especially egregious. Historically, the rate of tax-free interest offered on cash Isas was higher than on other savings accounts. But that has now changed, with the average cash Isa paying depositors only 0.41 per cent.

For the banks, that represents a very nice turn on the £158 billion sitting in cash Isas. Consumer Focus reckons savers are being shortchanged by up to £3 billion a year. Read more
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