OFT slams the banks. Again.

July 18th, 2008

The Office of Fair Trading (OFT) has released a new report saying that personal banking in the
UK is ‘not working.’ This comes in addition to the ongoing furore over bank charges and the underlying threat that if banks cannot impose such charges current accounts will no longer be free.

The report says that the £8bn industry is not clear enough, with many consumers not knowing their account’s interest rate or what they pay in bank charges. The complexity of the market means that consumers are less likely to switch banks, the watchdog says.

The OFT said that much of the banks’ revenue from current accounts was “derived opaquely”. Some 81% of banks’ income came from charges to customers with insufficient funds in their accounts (£2.6bn) or interest payments (£4.1bn).

The report found that more than three-quarters of customers did not know the interest rate of their current account, while many did not know how much they paid in bank charges.

The complexity and lack of transparency of current accounts made it hard for customers to compare accounts from different banks, the OFT said.

The report comes as the OFT continues an investigation into the fairness of overdraft charges. The OFT has been given legal confirmation that it can rule if bank overdraft charges of up to £35 are fair or not. But eight banks are appealing against the initial decision in the High Court, that the OFT has the jurisdiction to assess whether fees are unfair.

There can be little doubt that the UK banks act like a cartel and with only their own profits in mind, and the threat that a decision outlawing bank charges will result in a charge being applied to current accounts is nonsense.

The smaller and internet banks are ready and willing to swoop in and seize disaffected customers from the major banks and charging for current accounts would be just the ammunition they need.

The OFT report and the ongoing bank charge argument underline one salient fact. If you want a better deal, better customer service and a better product, switch banks. There are better deals out there ready to be snapped up.

This entry was posted on Friday, July 18th, 2008 at 11:29 am and is filed under Personal Loans. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

OFT slams the banks. Again.

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