Seven days to switch bank accounts

People and businesses wanting to change banks should be able to switch accounts within seven days, the Commission recommended today.

Problems with changing a bank account were one of the longstanding competition issues in UK retail banking, it said, with the largest four UK banks having 77% of personal accounts and 85% of small business accounts.



To alter this, the Commission has recommended that as well as transferring an account within seven working days, the banks will also have to provide "seamless redirection" of direct debits and credits from old accounts to new ones for more than a year and at no cost to customers.



The Commission stopped short of recommending account number portability, saying the cost and benefits are uncertain, but it added that the view on this may change in the future.







The Commission added that banks must also be more transparent on the prices of products, with more detailed information on the cost of a current account on annual statements.

"Easier switching would bring benefits only if accompanied by much greater transparency which would allow consumers to make informed choices, and so compel banks to offer products that would meet consumers' needs at competitive prices," the report stated.



The Commission added that the credit crisis in 2008 had added to the reduced competition in the sector due to the merger of Lloyds and HBOS, the acquisition of Bradford & Bingley, Abbey National and Alliance & Leicester by Santander and a number of other potential "challenger banks" pulling out.



While the Commission said there was not yet a case for recommending the retail bank market to the Competition Commission for investigation, a failure to improve the account switching process by 2015 would be grounds for the Office of Fair Trading to consider a referral.



Consumer groups said it is now up to the Government to implement the recommendations of the Commission.



Which? chief executive Peter Vicary-Smith said: "We need a dramatically improved switching process, a regulator which acts to promote competition and a market where banks genuinely have to compete for their customers by offering good value products and better service."







The Federation of Small Businesses (FSB) also welcomed the ICB proposals as a way to make banking safer for both businesses and current account-holders and also to improve competition.

FSB chairman John Walker said: "Switching banks has been a problem for many small businesses and the time and cost associated with it has put them off moving. Additionally, a slow and complicated switching process is an uncompetitive aspect of UK banking.



"These proposals will help make it easier so that small firms have the confidence to move between banks to get a better deal."

PA

Independent Partners; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at VouchedFor.co.uk

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