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Belgium: don't deny savers the right to choose, say Test-Achats

30 Jan 2012

Don't let your money languish in traditional savings accounts with large banks. This is the message to consumers from Test-Achats (TA), CI's member in Belgium.

TA has recently run simulations which show that these accounts, which hold deposits totalling tens of billions of Euros, earn savers as much as 50% less interest than the most generous offers available in the market. Many consumers are losing out on hundreds of Euros a year by not switching to better deals. TA is calling for an overhaul of savings accounts to promote competition and provide more choice for consumers.

Rewarding loyalty or trapping customers in bad deals?

The government, in consultation with the major banks, introduced the 'loyalty premium' in 2009. In this system, consumers who open a savings account receive a basic interest rate plus an additional loyalty rate if they leave the money in the account for at least 12 months.The basic rate is usually relatively low, and savers are therefore reluctant to withdraw their funds for fear of losing the loyalty premium.

But TA believes this practice is effectively a scam that locks consumers in, preventing them from shopping around for better deals. The major banks - which account for 70% of all consumer savings in Belgium - are left in the comfortable position of not worrying about losing their customers and therefore not fighting to keep them. But stifling competition in this way means consumers have less choice and many are stuck in bad deals.

Moreover, TA argue that this system has failed in achieving its stated aim to promote stability in the financial system, as the threat of losing premiums did not stop consumers moving their money out of Dexia when it was recently threatened with collapse.

Deceptive pricing

Another part of the problem is the tariff structure of savings accounts, which are far from transparent according to TA. It would be illegal for a shop to charge consumers a different price at the checkout to the one on the price tag. But this is precisely what can happen with savings accounts if the saver removes their money too early and loses their loyalty premium. And 'early' in this case can mean over a year after making the deposit.

Simplify savings accounts and improve information to consumers

TA insists that the government must act to simplify savings accounts in order to ensure proper competition and real choice for savers. And over 80,000 consumers who signed a TA petition are in agreement.

TA is calling for one unconditional interest rate to be offered on savings accounts, which would include the base rate and loyalty premium. In the meantime, they are calling on banks to inform consumers when their deposit 'anniversary' has been reached and it is safe to move their money without forfeiting the loyalty premium.

TA is also demanding that banks provide better and clearer information to savers. A standardised document would be a good first step.

Helping consumers find the best deal

To help get consumers switching, TA has launched a new online calculator that lets savers choose the most suitable account for them. This tool allows users to specify the amount and frequency of deposits they wish to make, and works out which provider is offering the best deal to match their circumstances.

A number of factors are taken into account, including the method for calculating interest, any applicable guarantees, terms and conditions and any changes in interest according to the amount being deposited.