The CMA has issued its possible remedies for retail banking, but we’re not convinced it has gone far enough. So how would you improve banking for customers?
Back in February we launched our Better Banks campaign. Part of the reason behind our campaign was that we felt the Competition and Market Authority’s (CMA) banking inquiry was failing to address some of the big issues – notably around overdraft charges. Well the CMA issued a supplemental notice of possible remedies for retail banking on 7 March, but we think they still fail to hit the mark.
From the stories you’ve shared with us about your banking experiences, the picture is quite clear: banks aren’t doing enough to support their customers.
Eye-watering overdraft charges
As C.H.DWYER pointed out, bank charges can be particularly punishing for customers, even for the tiniest slips into the red:
‘I have not needed an overdraft for a number of years but I do think banks are charging punitive amounts for being slightly overdrawn. Matters are worse if you do not check your bank accounts daily to see immediately that you are overdrawn.’
Pam Quelch explained to us how these charges can be the start of a snowballing debt, and an unnecessary worry for her student daughter:
‘My daughter is a first year university student and has been using her overdraft and went a little over, the bank was going to charge her £10 per day. It’s ridiculous as then you just get further into debt.’
For Calchan, the charge without warning seems unfair, and hardly the practice of a customer service industry:
‘In this day and age it should be possible to send an email or text alert to allow say 24 hours to rectify the situation rather than just slapping a charge on. My children have only slipped up once but it was a painful experience for them. Banks need to be more nuanced and genuinely customer focused in what they offer.’
It would seem that banks just aren’t doing enough to support overdraft users, like Simon:
‘Customers are penalised by banks when they should have been more circumspect with their lending in the first place. I got overdrawn but they now refuse to help me out by not changing this into a loan that I could pay off in six years. The money saved in overdraft charges would have paid the loan off. Instead I am faced with several more years of debt before I can clear this.’
And, as illustrated by Mike’s story, the bottom line is that overdraft charges generate a lot of revenue for the banks:
‘My bank also charged me £30 per day for being overdrawn for just £2 for a total of 20 days. Then they also charged me with an unauthorised overdraft of another £30+ interest! Total cost nearly £1000 which was more than my wages! So kept getting charged every month!’
Finding a solution
It appears that the CMA agrees with the issues we’ve raised regarding overdrafts, but it has only listened to us to an extent.
Some of the suggested remedies are a step in the right direction. Requiring banks to give their customers more alerts, prompts, buffer zones and grace periods to help them manage their money and avoid overdraft charges, are all good suggestions.
But the CMA still seems reluctant to take action to control unfair, punitive charges faced by unauthorised overdraft users. And if these charges stay high, generating significant revenue for the banks, then we need to question how incentivised are the banks going to be to help their customers avoid them?
So what do you think needs to be done to improve banking services?