Transferring your ISA – snail’s pace?
In June 2010 the Office of Fair Trading (OFT) demanded that Isa providers should cut the time it takes to transfer funds after their investigation discovered that transfers took an average of 26 days.
The OFT found that a quarter of all Isa transfers took longer than a month – which could mean hundreds of pounds worth of lost interest.
The report also found that even once the funds had been transferred there could be a gap of up to five days before interest was paid.
This is the same old problem. You decide you will get a better deal with another provider, and the outfit you switch from drags its heels in making the transfer. It is unnecessary and infuriating. You are perfectly entitled to transfer most Isas, the main reason to do so being the initial interest rate has dropped and is no longer competitive.
The OFT announced greater transparency over interest rates and a significant reduction in the time it should take to transfer between cash ISA providers, following agreements with the industry.
The changes come as part of the OFT’s response to a super-complaint from Consumer Focus about the cash ISA market. Consumer Focus asked the OFT to look at concerns including the time it takes to transfer a cash ISA, the transparency of interest rates and introductory bonus rates.
After a 90-day investigation, the OFT has secured agreement from the industry to:
- publish clearly the interest rates on the face of cash ISA statements – around 15 per cent of customers currently receive statements that include their interest rate, but from early 2012 all statements will include this information, and
- revise industry guidelines on how long cash ISA transfers should take: down from 23 to 15 working days – this will come into effect from 31 December 2010.
To ensure that the new transfer timelines are adhered to and to prevent consumers losing out from delays, the OFT today recommended that:
- HM Revenue & Customs and the Financial Services Authority (FSA) change their guidance to reflect the revised industry guidelines
- the FSA considers taking regulatory action if the industry fails to keep to the new timescales, and
- providers ensure that, if delays occur, consumers are no worse off than they would have been if the timelines had been met.
The OFT found that introductory bonus rates were not causing substantial harm to consumers since the existence of such rates is clear to consumers and they are informed when the introductory bonus rates end. The greater transparency and quicker transfers announced today will help consumers to know their interest rate so that they can compare offers, and switch to better deals more easily and quickly if they wish to do so.
Clive Maxwell, the OFT’s Senior Director for Services, said:
‘This is an important market for the 17.5 million consumers with £143 billion of savings in cash ISAs, and also for the wider economy since those savings support lending to many households and businesses. Our work over the past 90 days has revealed that, whilst there is often strong competition between providers in this market to win new savings, the transfer of cash ISAs is taking too long and there is not enough transparency over interest rates. The voluntary changes announced today will give consumers a fairer deal and drive stronger competition. We are grateful to Consumer Focus for bringing these issues to our attention.’
The full report is available from te OFT.