A Consumer Focus investigation has found that the way banks operate the Cash ISA system means that customers are losing out on between £1.5 billion and £3 billion a year in interest payments.

The Individual Savings Account (ISA) was set up by Gordon Brown in the late 90s to encourage saving and thriftiness. It enabled people to put a relatively small amount of money aside and accumulate some interest without having tax deducted. There are now two forms of ISA, the ‘cash’ ISA and the ‘stocks and shares’ ISA. The investigation centred on the more popular cash ISA market.

As a result of this investigation Consumer Focus has launched a ‘Super Complaint’ to the Office of Fair Trading (OFT). The complaint was made under the Enterprise Act 2002 and the OFT have 90 days to respond with a decision on what they intend to do about it.

Consumer Focus is a statutory organisation created through the Consumers, Estate Agents and Redress Act 2007 that “is the consumer champion for England, Wales, Scotland and (for postal consumers) in Northern Ireland. We

operate across the whole of the economy, persuading businesses and public services to put consumers at the heart of what they do.” Their priorities are access for all, quality of service, value and sustainability.

According to Consumer Focus short term eye-catching savings rates (bait pricing), confusing terms and slow transfer processes are costing savers billions in the long term. I some cases one the ‘bait rate’ has ended the ISA rate drops to below that of a standard taxed savings account. But when people do identify they have a very bad deal they meet many obstacles in their attempts to transfer their money elsewhere. The banks blame the latter on Inland Revenue bureaucracy.

There will now be millions of people who have recently been persuaded to put their hard earned money into a cash ISA who will worry if they have done the right thing. This exposure of banking ‘practices’ will also dissuade some people from saving at all.

We’ve had endowment misselling, the pushing of credit, the Payment Protection Insurance misselling, excessive bank charges and now ISA rip-offs. All of these have netted the banks vast profits, even if they had to compensate some people later down the line.

With the most recent of them, the bank charges case, the OFT ended up bringing the wrong law to bear on the case. Then when they lost on that narrow point mysteriously dropped the whole thing. The consumer is being systematically taken to the cleaners time and time again by the banks, who then expect a bail out to keep their bonuses flowing when it all goes pear shaped for them.

There are consumer watchdogs, consumer laws and consumer protections all over the place. But they are all obviously for some reason not acknowledging that elephant in the room, the banks, until they are forced to. Why can they not act before it gets out of hand? Now what are the Financial Services Authority’s four main objectives? Ah yes, “maintaining market confidence; promoting public understanding of the financial system; securing the appropriate degree of protection for consumers; and fighting financial crime.”

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