Banks and building societies have bowed to pressure from the Office of Fair Trading and agreed to make current account charges more transparent and also to make it easier for customers to switch.
The decision, which includes providing an annual summary of account costs for each customer to help people focus on whether they were getting good value, follows a market study carried out by the OFT in 2008 which found the £8bn current account market was “not working well for consumers”.
The OFT said it was particularly concerned about the transparency of charges, difficulties consumers faced in changing banks and the issue of unauthorised overdraft charges.
It said that a combination of complexity and opacity made it extremely difficult for individual consumers to know how much their account could be costing them compared with others on offer.
The change means that charges will now be made more prominent on monthly statements so that people are aware of what they are paying. Banks will also start to provide average credit and debit balances for accounts to help people work out the benefits of changing provider.
In order to smooth the switching process banks will be acting to minimise any problems arising from transfer of direct debits. They are also putting together a new consumer guide and website to improve awareness of the automatic switching process.
The OFT admitted that the third problem it had identified with the banks, unarranged overdraft charges, was still unresolved. It is conducting a separate investigation into the fairness of the existing system and it awaiting a judgment in the Supreme Court case.
”As consumers become more aware of the costs of their account and more confident in switching as a means to get better value so banks will need to offer more competitive and innovative products and services to attract as well as retain customers,” said John Fingleton, chief executive of the Office of Fair Trading.
The consumer group Which? welcomed the move. Peter Vicary-Smith chief executive of Which? said: “It’s great that the OFT has secured an agreement from the banks to give people clearer information on account charges, average balances and annual statements.
“This is a step in the right direction and we hope it will give customers the confidence to switch accounts, as well as ditch those banks that offer bad value and poor customer service.”
Others questioned the strength of the changes, however. Andrew Hagger, money analyst at Moneynet.co.uk said the actions do not go far enough. ”The big problem is that the banks all have different tariffs and charges so even if they make those charges clear they will still be very difficult to compare,” he said. “There needs to be a total overhaul of the charging system so customers can compare like-for-like.”
But he agreed that it was good to see the banks moving in the right direction.
Peter Jackson, managing director of consumer banking at Lloyds Banking Group, said: “Lloyds Banking Group will be implementing all of the OFT’s recommendations including enhanced monthly information on statements and an annual summary to help all customers fully understand the charges and interest rates that have been applied to their accounts. We already provide Halifax and BOS customers with enhanced monthly information and will be rolling this out for Lloyds TSB customers as soon as possible.”
