The UK’s banks are to come under yet more scrutiny after the Office of Fair Trading launched a new probe into the current account market.
The OFT warned that banks are doing too little to focus on the needs of their customers and raised fresh concerns over a lack of competition on the high street. It will look into whether current account providers have satisfied requirements that it set out after its previous review four years ago.
Much of the focus will be on the ease of switching current account, helping customers run their accounts better and the transparency of charges.
Claire Hart, director of the OFT, said: “More generally, we are concerned that a lack of effective competition means the retail banking sector is not working in the interest of customers and businesses.
“We want to see banks become more customer-focused and this will be the central theme of our programme of work going forward.”
The OFT’s findings – due by the end of the year – will feed into its response to the Independent Commission on Banking, which last year called for greater competition to shake up the high street banking market.
Under the ICB’s proposals, the OFT would refer the current account market to the Competition Commission by 2015 if it hasn’t seen sufficient improvements.
The review comes in the wake of a series of scandals that have further undermined trust in the UK’s high street banks. The Barclays Libor scandal and a Royal Bank of Scotland systems meltdown that caused chaos for millions of account holders have triggered new calls in recent weeks for unhappy customers to vote with their feet.
Organisations to have reported a sharp increase in the number of people switching away from the big banks this week include Nationwide. The UK’s biggest building society – owner of the Dunfermline – yesterday revealed that it had seen a 67 per cent rise in the number of people moving their main current account to it over the past five days.
John Crossley, head of current accounts at Nationwide, said: “Recent events appear to have encouraged change.
“People are starting to realise that switching is easier than they thought and that for a little time and effort they can get a competitive current account deal from a provider that they trust.”
Eight in ten people would now consider switching current account, with a fifth already doing so, according to new research from uSwitch.com. A similar poll by Moneysupermarket.com found showed that a fifth of banking customers have lost trust in their bank amid the latest controversies. Kevin Mountford, head of banking at MoneySupermarket, said: “The recent turmoil in the banking sector has shown a desire from consumers to vote with their feet.
“However, improving competition is not just about making switching easier, the OFT will also look at ways to improve the payments system and the banking market for small and medium-sized businesses.”
The furore surrounding high overdraft fees has died down since the OFT lost a 2008 bid to rule on the fairness of the charges.
But there were 15,000 new complaints about current accounts in the year to the end of April, according to the Financial Ombudsman Service, making it the third most complained about product.
Many concerned delays in switching accounts, one of the areas the OFT plans to shine a light on over the coming months. Administration errors, problems with packaged accounts and disputed transactions were also common causes for complaint, said the ombudsman.
SUPERMARKET PRESSURE, PAGE 2
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