MSE News: OFT announces crackdown on cash Isa rates and transfers

juicyjude

Totally agree with previous post. Its a total sham

derrick

juicyjude wrote: »

Totally agree with previous post. Its a total sham

Seconded..

MarkyMarkD

Innys wrote: »

I don't think the suggestion was attaching the remittance to an e-mail. The idea was sending the money electronically by BACS and an e-mail at the same time from Bank A to Bank B breaking the balance down.

I'm sorry, but are you saying that opening "hundreds or thousands" of these envelopes a day is foolproof? Do me a favour.

I don't see what you think is hard about opening an envelope containing an ISA transfer certificate with a cheque attached, and using the information therein to open the account and credit the cheque's value.

It's not rocket science. When Bank A sends a total remittance to Bank B electronically, all they need to do is send a simple encrypted Excel file at the same time listing the names, addresses, NI numbers, individual balances. Obviously, the total of the Excel file equals the value of the electronic remittance.

Then, having checked the control total on the Excel file agrees to the total remittance, the data in the Excel file, Bank B can set up the individual accounts. Indeed, the Excel file itself would probably be a good starting point as it contains all the key information.

Yes, the Excel file could contain an error, say the wrong NI number, but that is also true if the information is sent individually for each account with the cheque.

I don't deny that the sort of solution you suggest makes sense. But each provider would need to modify its systems substantially to accommodate this change. In general, providers do not batch up the transfers to each other provider. They simply send each item in the same way as they would process most other postal withdrawals - but along with an ISA transfer certificate.

Doing it as batches for each provider actually requires a lot more work, and goes against some of the OFT ruling's principals - which disapproves of gathering transactions together and processing them when there are enough.

I don't deny that inertia is the biggest deterrent to switching ISAs for the vast majority of people. However, for those of us that do choose to switch, banks deliberately make it as difficult, awkward and slow as possible. Why are they able to get away with it?

In my view, in the 21st century, there is simply no justification for sending tranfer remittances by cheque other than slowing the transfer of money down. If cheques are the only solution, why are the British Bankers Association themselves are looking at phasing them out?

That's a different matter. There is no doubt that financial institutions will not rely on cheques for ISA transfers forever. But at the moment, they do the job perfectly well and the obsession with "why don't they use BACS" is really missing the point in 99% of ISA delay cases.

It's not the method of funds transfer that causes delays, it is the failure to (a) request the funds transfer and (b) actually send the money that is the problem.

Innys

I'll explain why I feel doing it all by cheque is far from foolproof.

Doing all of this by cheque is unnecessarily manual and, therefore, highly prone to human error. Given that the source of the information will be electronic in Bank A, the current approach requires two pieces of manual intervention. First, at Bank A, to write the cheque out and the account holder's information. Then, at Bank B, to key in the new account holder's information.

Then, on top of this we have the vaguaries of the post, cheques being received and not banked in error and letters received but the cheque and information being separated in error. I could go on, but I think you get the idea.

In summary, I think a cheque driven process cannot be efficient or more reliable that doing it all electronically.

As regards your point about providers having to change their systems, they already talk to each other via the BACS system. Why couldn't they include ISA transfers in their BACS payments from Bank A to Bank B? If the account holder's information could not be included as additional fields on the BACS tape, the encrypted Excel file I have suggested could still be used.

Finally, your point that cheques do the job perfectly well is simply a matter of opinion. Banks may feel they do, your average consumer feels differently.

I don't think you and I will ever agree on this one so I'm not going to bother posting any more on this thread.

Milarky

The OFT response has been discussed on today's Moneybox programme - worth a listen (between 9.30 and 16.00 minutes)

When the man from the BBA comes on he shows the usual lack of grasp of people who front up for the [STRIKE]maifa[/STRIKE] banking industry these days ('tax data' etc) At the end they play the infamous clip of Angela Knight from two years ago - technically getting caught out by saying something which the BBA finally corrected after nearly a year - that there was 'no intention' that there be 'any dead areas as far as interest [on cash ISAs was] concerned'. The man from the BBA then 'helpfully' goes on to justify continuing to not pay interest for every day [i.e. 'dead areas] by saying that 'competition' means that some providers already meet the customer on this. So what! That misses the point (wilfully) that most banks won't and continue to help themselves to a couple of days interest of our money - the 'come and get us' defence.

Interestingly, if he's right (and jury's out the accuracy of anything he says) some providers - whom he did not name - do already send the cash electronically. If some are doing it then all could be. Still, they have to kick it into the long grass of a 'voluntary' review.

(Still not a great deal of evidence of a 'crackdown' then!)

Sparky47

MarkyMarkD wrote: »

That's a different matter. There is no doubt that financial institutions will not rely on cheques for ISA transfers forever. But at the moment, they do the job perfectly well and the obsession with "why don't they use BACS" is really missing the point in 99% of ISA delay cases.

It's not the method of funds transfer that causes delays, it is the failure to (a) request the funds transfer and (b) actually send the money that is the problem.

Unless as in my case the cheque is lost in the post, then there is a long delay while they request another cheque.
In the meantime I am not earning any interest as both banks deny responsibility.

MarkyMarkD

If the cheque is lost in the post, the original provider should reinstate your account, and then issue a new closure cheque at a later closure date.

The scenario should not lead to a period of time when no interest is payable.

And as for "both banks deny responsibility", it may well be "lost in the post" which is neither bank's responsibility.

MarkyMarkD

Innys wrote: »

I'll explain why I feel doing it all by cheque is far from foolproof.

Doing all of this by cheque is unnecessarily manual and, therefore, highly prone to human error. Given that the source of the information will be electronic in Bank A, the current approach requires two pieces of manual intervention. First, at Bank A, to write the cheque out and the account holder's information. Then, at Bank B, to key in the new account holder's information.

Then, on top of this we have the vaguaries of the post, cheques being received and not banked in error and letters received but the cheque and information being separated in error. I could go on, but I think you get the idea.

In summary, I think a cheque driven process cannot be efficient or more reliable that doing it all electronically.

As regards your point about providers having to change their systems, they already talk to each other via the BACS system. Why couldn't they include ISA transfers in their BACS payments from Bank A to Bank B? If the account holder's information could not be included as additional fields on the BACS tape, the encrypted Excel file I have suggested could still be used.

Finally, your point that cheques do the job perfectly well is simply a matter of opinion. Banks may feel they do, your average consumer feels differently.

I don't think you and I will ever agree on this one so I'm not going to bother posting any more on this thread.

The information cannot be incorporated in a BACS message because there is not enough space.

I have agreed that your encrypted file solution is a good idea, within reason, but it also involves lots of systems changes, all of which cost money, which at the end of the day will be borne by savers.

Sparky47

MarkyMarkD wrote: »

If the cheque is lost in the post, the original provider should reinstate your account, and then issue a new closure cheque at a later closure date.

That may be what they should do, however they refused to despite a letter of complaint. :mad:

MarkyMarkD

Milarky wrote: »

The OFT response has been discussed on today's Moneybox programme - worth a listen (between 9.30 and 16.00 minutes)

When the man from the BBA comes on he shows the usual lack of grasp of people who front up for the [STRIKE]maifa[/STRIKE] banking industry these days ('tax data' etc) At the end they play the infamous clip of Angela Knight from two years ago - technically getting caught out by saying something which the BBA finally corrected after nearly a year - that there was 'no intention' that there be 'any dead areas as far as interest [on cash ISAs was] concerned'. The man from the BBA then 'helpfully' goes on to justify continuing to not pay interest for every day [i.e. 'dead areas] by saying that 'competition' means that some providers already meet the customer on this. So what! That misses the point (wilfully) that most banks won't and continue to help themselves to a couple of days interest of our money - the 'come and get us' defence.

Interestingly, if he's right (and jury's out the accuracy of anything he says) some providers - whom he did not name - do already send the cash electronically. If some are doing it then all could be. Still, they have to kick it into the long grass of a 'voluntary' review.

(Still not a great deal of evidence of a 'crackdown' then!)

There is currently an industry trial going on, involving about 5 ISA providers. They are sending money electronically between themselves only so actually a very small proportion of transfers are going through the process.

They have built a system specifically to do this, at their own cost.

If it is a success, presumably they will invite the other ISA providers to join - and to pay a joining fee to cover the costs so far, and an ongoing fee per transaction.

It remains to be seen whether (a) the benefits are as good as made out and (b) others choose to join.

I keep repeating this, but making the payments electronically is the wrong solution to the smallest part of the problem. If an electronic solution is to be implemented it should deal with the whole process from start to finish - i.e. new provider should scan in the transfer request and submit THAT, along with the basic data, electronically to the old provider, who should then pass the funds and the ISA certificate electronically to the new provider.

Now, that would be a system worth implementing, as it would deal with both the postal delays and the loss of data issues. It would also eliminate a lot of the multiple keying involved which causes error, and also enable problems to be passed straight back to the new provider to rectify with the customer.

Half way houses incur most of the cost without most of the benefits.

A lot of the problems which occur are due to silly reasons. Let me give you some:

(1) customer enters their NI wrong on their new app form (or it might have been their old app form).
(2) customer moves house, doesn't bother telling their old ISA provider, then applies to do a transfer under their new address.
(3) customer applies to transfer out from a passbook-based old ISA, but doesn't give their passbook to the old or new ISA provider.

Both of these lead to the transfer request being rejected - (1) because one or other app form is wrong, and the customer has at some stage made an invalid ISA app from HMRC's point of view; (2) because it may be a fraudulent request as far as the old provider is concerned as the address doesn't match, and the customer has breached the terms of their old account by not notifying the address change; and (3) because the old ISA terms and conditions require the passbook to be submitted for any withdrawal/closure/transfer.

These are the sort of scenarios where customers get stroppy about "delays in the process" - but they are caused by customer errors.

All the stuff about "23 working days" (or "15 working days" in future) only applies once the customer has actually submitted a valid request, with all necessary information.

And the HMRC "30 days" only applies from the point all the valid information has successfully reached their old ISA provider from the new ISA provider.