It’s about time. The city watchdog has announced it will take action to improve competition in the current account market.
Let’s face it, current accounts are a bit rubbish, aren’t they? Many offer 0 per cent interest no matter the balance, overdraft charges can be extortionate, late payment fees are astronomical and, despite years of industry pleas, switching accounts is still seen as a pain in the neck.
To add to customer woes, back in August the Competition and Markets Authority (CMA) published a number of recommendations aimed at shaking the retail banking industry, including ordering banks to share customers’ information with third parties from 2018 to make it easier for them to find better deals. The report ran to 700 pages and cost £5 million. But the proposals were roundly criticised as lacking teeth and, in general, not going nearly far enough.
One major grievance was the CMA’s decision not to impose limits on overdraft charges. As anyone who has strayed into overdraft territory knows, these fees can be crippling. Depending on which bank you are with, they can range from daily interest rates set incredibly high and/or set penalties. For instance, unintentionally slipping over your limit by just a few pounds can result in a £35 charge.
In addition, research by The Co-operative Bank shows that an estimated two in five overdraft holders, who have changed to a new provider since the introduction of the Current Account Switching Service in 2013, have incurred unexpected costs and charges as a result of dipping into the red.
At the latest count, there have been 11 separate inquiries into the banking sector in the past 17 years. Yet little has changed. Since 1999, the big four of HSBC, Barclays, Royal Bank of Scotland and Lloyds Banking Group have enjoyed a stranglehold on the market.