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On the 16th September 2013, new rules were brought in by the Government to make it easier to switch current accounts. This has lead to the Current Account Switch Service (CASS) placing the onus on banks to help the customer to switch. Banking watchdogs had previously believed that customers were putting up with low interest rates and unfair charges owing to the difficulty of changing accounts.
It was also thought that under the new rules, banks that provided the most value for customers would find it easier to attract and retain new business, with newer, smaller banks being better able to compete with established account providers.
Under the new legislation, banks now have to adhere to the 7-day current account switch guarantee. This means that both the old bank and new account providers need to cooperate to ensure that all funds, overdrafts, standing orders and direct debits are swapped within 7 working days. In addition to this, any payments into the old account will need to be reapplied to the new account for up to 13 months after the date of the switch.
For consumers, this makes the process of shopping around for a new current account much easier. Having opened an account with the new bank, they will then be provided with a current account switching guide, and they will then sign a switching agreement and complete an account closure form for the old account.
Having given the new account providers the details of the account that from which they wish to transfer, the new providers will then liaise with the old bank to ensure that all standing orders and direct debits are transferred over within the specified time period. To ensure that there is no point at which the account holder cannot access their funds, the old account will continue to be accessible until the switch date.
For payments into the account such as salaries or benefits, the account holder can notify the relevant parties of the change. However; if a payment has already been made and the old account is closed, the payment will automatically be applied to the new account. In addition, if the the account holder has yet to notify the person making the payment of the change, the new bank will notify them instead. This process will take place for 13 months after the date of the change, and should there be any financial disadvantage owing to this process such as a loss of interest or a charge, the new bank will reimburse the customer.
In September of 2014, the Financial Conduct Authority (FCA) undertook a review of the benefits of this service. They found that CASS had achieved its aims, with consumers feeling better able to switch accounts owing to the increased simplicity of the switching process.
This has further benefited customers by making the banks less complacent and offering better value accounts. It has also lead to a reduction in unfair bank charges, as banks are now aware that levying charges for one-off mistakes is more likely to result in customers taking their business elsewhere.
For the customer, it has also reduced the amount of personal administration that they have to undertake when switching, and it has helped to increase consumer confidence by introducing more transparency and a better choice of account providers.