OFT Demands Changes to Current Accounts
18/07/2008
The Office of Fair Trading (OFT) has called for a shake-up of personal bank accounts. The OFT said that much of the banks' £8.3bn of revenue from current accounts last year was derived "opaquely", with 81 per cent of income coming from either insufficient funds charges (£2.6bn) and net credit interest income (£4.1bn).
The OFT report claims that banks are failing consumers by making current account charges too complex and not transparent enough. Greater regulatory intervention and reference to the Competition Commission are both measures the industry watchdog is threatening to take if the banks don't improve their services.
A 15 month investigation of the current account market preceded the OFT report. The findings of the investigation revealed that a "significant number" of customers weren't aware of how much they were paying in bank charges, either before or after they were incurred, and more than three-quarters did not know the credit interest rate of their current account.
"The result", said the report, "is that only six per cent of customers we surveyed had switched in the last 12 months - one of the lowest switching rates in Europe."
The OFT investigation has also resulted in the first stages of a High Court test case concerning whether overdraft charges are fair.
The OFT report claims that banks are failing consumers by making current account charges too complex and not transparent enough. Greater regulatory intervention and reference to the Competition Commission are both measures the industry watchdog is threatening to take if the banks don't improve their services.
A 15 month investigation of the current account market preceded the OFT report. The findings of the investigation revealed that a "significant number" of customers weren't aware of how much they were paying in bank charges, either before or after they were incurred, and more than three-quarters did not know the credit interest rate of their current account.
"The result", said the report, "is that only six per cent of customers we surveyed had switched in the last 12 months - one of the lowest switching rates in Europe."
The OFT investigation has also resulted in the first stages of a High Court test case concerning whether overdraft charges are fair.
