British banks are still failing customers, watchdog warns
Britain’s banks received a fresh blow today as the consumer watchdog, the Office of Fair Trading, said they were still failing to be competitive enough and not focusing on customers’ needs.
The OFT held back from the ultimate sanction of referring the banks to the Competition Commission, but said it could do so when it looks at them again in 2015.
In a damning report, the watchdog said: “A combination of a lack of competition, low levels of innovation and customer apathy in the face of unclear costs and a lack of diversity in the choices of current accounts available mean that this market is not working well for consumers or the wider economy.”
In the five years since the OFT last looked at personal current accounts, it said, the big banks had increased their market share, few new competitors had opened, and consumers still rarely switch accounts.
Clive Maxwell, chief executive of the OFT, said: ‘Personal current accounts are critical to the efficient functioning of the UK economy. Despite some improvements, this market is still not serving consumers as well as it should. Customers still find it difficult to assess which account offers the best deal, and lack confidence that they can switch accounts easily. This prevents them from driving effective competition between providers.”
The OFT said that customers had saved as much as £928 million a year from the fall in charges on unauthorised overdrafts, but said that charging structures remain too complex.
The watchdog told banks that they must make current account charges more transparent and the switching process more reliable, and improve the way in which unarranged overdrafts are handled.
Maxwell said: “The retail banking sector needs to become more competitive and customer-focused to ensure that further action by the competition authorities is not required.”
Richard Lloyd, executive director of Which?, said the OFT’s “damning verdict” showed how badly people are still being let down by banks. He said: “Everyone — consumers, the Government, leading bankers and now the OFT — seems to agree that big change is needed in banking, and that much greater competition on the high street is urgently needed to make the banks work for customers, not bankers. So it’s disappointing to see current account providers avoid immediate action by the competition authorities, but the banks are not off the hook.”
The OFT said that measures in the pipeline which could improve competitiveness include the sale of swathes of branches by Lloyds Banking Group and Royal Bank of Scotland, a new automated account switching system, and improved ways for consumers to compare the cost and services of accounts.
Anthony Browne, chief executive of the British Bankers’ Association, said: “The industry is committed to modernising and improving current accounts so that customers get the best possible service. Banks now provide annual statements to all customers detailing what they have paid for their service, and scenarios so customers know what they will pay if they exceed agreed limits.”
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