The Office of Fair Trading (OFT) has today announced review into the personal current account market in what is likely to involve fresh criticism of the banking sector.
The OFT is investigating competition in the sector and is looking to address how consumers are treated across the sector and to assess whether recommendations it previously made have been acted upon.
If it judges that insufficient progress has been made then it could refer the issue to the Competition Commission by 2015, something which was recommended by the Vickers report and the Independent Commission on Banking. If the matter was referred to the Competition Commission and it found that more competition was required, it could insist on the break up of existing banks to enable new players to enter the market.
The new review will follow up on the OFT’s last one in 2008 and look at whether recommendations made then have improved the experience of customers in three key areas; switching current accounts, the transparency of charges and allowing people to manage their accounts more effectively.
In a staement, the OFT said: “If we do not see real change from banks over the course of this programme, then a more radical approach may be considered.”
Claire Hart, OFT Director said: “We committed to keeping the personal current account market under scrutiny following our 2008 study. Through this review we want to understand what progress banks have made in providing customers with better information about account charges, greater control over their accounts and easier account switching facilities.”
After the last review by the OFT, banks agreed to provide customers with an annual summary of the total cost of running their account and to improve the process of transferring direct debits when they switch their accounts.
Kevin Mountford, head of banking at MoneySupermarket said: The creation of new switching rules and the auto-redirection of bank account numbers between providers will make the process of switching easier.
Since then the banking sector has undergone several scandals that impacted on the reputation of banking. These include the mis-selling of payment protection insurance (PPI) and in the last few weeks the revelations that Barclays and several other banks were involved in the manipulation of the Libor interbank lending rate.
Survey evidence and data from individual banks suggest that the latest scandals have encouraged more people to switch current account, something that consumers have been very reluctant to do in the past.
Adam Scorer, Director of External Affairs at Consumer Focus said: “Mis-selling, unfair charges, high levels of complaints, opaque products with complex terms and conditions and a sector dominated by a handful of big banks and building societies are also signs that customers are not being well served. The time is right for a major shake-up of the personal current account market.”
The OFT says that in addition to the review of the personal current account market, it intends to look at the operation of payments systems and the banking market for small and medium-sized enterprises.
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