Banks agree switch guarantee

Wallet with cards and moneyA new customer guarantee to take the hassle out of switching current accounts and ramp up competition between providers will be in place in one month's time, the UK's payments body has confirmed.

Some 33 bank and building society brands accounting for almost all current accounts in the marketplace, have signed up to the agreement which will cut the length of time it takes to move accounts from up to 30 working days to seven working days.

The Payments Council confirmed the launch date of September 16 for the streamlined switching service, which also means all outgoing and incoming payments will be moved over to a customer's new current account.

Payments which are accidentally made to the old account will automatically be redirected to the new account for 13 months after the switch.

Consumers will be refunded interest and charges if anything goes wrong.

Adrian Kamellard, chief executive of the Payments Council, said: "As final preparations are made for launch we look forward to a new era of account switching which will lead to greater choice for customers and wider competition in the marketplace."

There have already been signs that banks are gearing up for the changes, although not all of the preparations may be welcomed by consumers.

Last week, Halifax put a new rule on a £100 cash incentive it offers for customers who want to switch to it.

This means consumers are now forced to shut their previous current account down when they complete their switch to Halifax.

Before the new rule was introduced, customers only had to transfer their direct debits and incoming payments to receive the £100, but Halifax said it had introduced the new requirement "in readiness" for the new switching service.

The Payments Council confirmed that the new switching guarantee does require that the old current account must be closed.

But consumers can still choose to opt out of the guarantee if they do not want to do this and switch their payments over themselves.

Current account providers will display details of the new guarantee in branches and on their websites.

Experts have already seen some evidence of banks increasing competition in preparation for the faster switching rules.

Rachel Springall, spokeswoman for financial information website Moneyfacts, said: " With only one month to go, we have already seen banks such as First Direct and NatWest launch some incentives to entice new customers.

"This week, First Direct increased its switcher incentive from £100 to £125 for customers who switch to them from now until the end of October.

"Halifax is still offering customers £100 to switch to them and now NatWest/RBS have a cashback plus scheme for customers to earn cash back when they shop using their debit card.

"This is restricted to specific retailers but if they earn £5 cash back it can be exchanged for rewards such as Cineworld tickets."

The extent to which the new rules will spur more people into action is not yet clear.

Recent research by M&S Bank found that one in four (26%) people were considering switching their account.

The thought of the hassle this could involve and the worry about the process going wrong were found by M&S to be the main reasons putting people off switching - potential barriers which should be removed under the new system.

There has been other recent evidence that consumers have been getting more fed up with their current account providers.

The financial ombudsman recently reported that complaints about current accounts had rocketed by more than a third over the last year, following two years of falls.

Common complaints the ombudsman has seen involve people who have hit trouble with their finances and feel let down by the way that their current provider has dealt with the situation and consumers who have had trouble cancelling payments.

Ms Springall said people considering making the jump to another provider should bear overall benefits in mind rather than initial perks.

She said: "Once an institution has you as a current account customer it is usually for the foreseeable future, so they are likely to offer you other products such as cards, loans and mortgages while you have a relationship with them.

"Assessing what you need from a current account on outset is vital."

A Treasury spokeman said: " The Government is determined that the banking system works for customers.

"That is why it asked the industry to create a switching service that makes it simpler, safer and quicker for customers to move their account if they think there is a better deal out there for them.

"The Government looks forward to the launch of the service next month which, if successful, has the potential to revolutionise customer choice."