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11 Sep 2013

FCA Launches Probe Into Cash ISA Market

The Financial Conduct Authority (FCA) is launching a probe into the UK´s individual savings accounts (ISAs) market, following concerns that many providers are using the so-called “teaser” rates, the Financial Times reported.

The regulator will look into competition and introductory interest rates and will also examine how often consumers switch accounts. The main concern is whether ISA providers take advantage of savers with “teaser” rates - attractive rates that are used to convince customers to buy a certain financial product. These rates only last for a limited time before switching to a less favourable one.

The review on the £1 trillion cash savings market was preceded by a wave of criticism from consumer groups towards providers. Many organisations have claimed that consumers were not aware that the rates they were given would be changed after a period of time, and consequently they failed to move their savings after the headline rate expired, the Financial Times pointed out.

It is estimated than over four in five British adults have a cash ISA, the FCA said. Because of the huge value and the popularity of the market, the regulator would investigate whether competition is working effectively and if providers are operating in the best interest of consumers. Martin Wheatley, FCA´s chief executive, told the Financial Times that after the investigation was complete, the regulator would decide if any action was necessary.

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