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The CMA’s proposed changes to banking don’t go far enough

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The Competition and Markets Authority (CMA) has made a number of suggestions to improve the current account market. But they don’t go far enough.

Today we got a chance to see what the CMA has been working on in its 18 month investigation of the current account market. It’s confirmed what we’ve been saying for some time – competition in the banking market just isn’t working.

A lack of competition

The big four banks – Lloyds, Royal Bank of Scotland, HSBC and Barclays – control more than three quarters of Britain’s personal current accounts. And that’s not likely to change any time soon, since only 3% of customers switched in 2014.

More than a third of customers have been with the same bank for more than 20 years. Indeed, it’s quite telling that you’re more likely to break up with your partner than with your bank. No wonder the big banks are failing to compete for our business.

Our campaign supporter Anthony has harsh words for the banks:

‘Banks are making money out of people who don’t switch or check their accounts regularly. Often these people will be elderly or vulnerable. Most banks do not reward customer loyalty, act amorally and treat savers with contempt.’

Making it easier to switch

The CMA makes it very clear that competition isn’t working and that we need to be encouraged to switch from accounts that aren’t right for us. And breaking up with your bank could be good for your pocket, with the CMA suggesting that you could be £70 a year better off. That rises to £260 a year if someone’s regularly dipping into their overdraft.

So what does the CMA propose should change? Their suggestions include:

  • Banks prompting customers to switch at certain trigger points, such as after branch closures or when overdraft charges change
  • Making it easier for us to switch by allowing customers to see their transaction history to help us compare banks
  • Funding a ‘sustained’ advertising campaign for the Current Account Switching Service to help raise public confidence in switching

We need more radical action

But will these changes actually change banks’ behaviour? We don’t think so, and we’d like to see more radical action. The CMA’s own evidence shows that people are disengaged from the banking market, so better information and nudges to switch simply won’t be enough.

We need to see creative solutions that’ll spur the banks into genuinely competing with one another. So we want the CMA to:

  • Look at forcing banks to more proactively help customers who regularly use an unauthorised overdraft, as well as increasing compensation for customers who suffer poor service
  • Regularly name and shame the worst providers for bad behaviour
  • Consider how banks can put people in control of their overdrafts, for example by notifying customers before they go into the red

The regulator now has six months to find more radical ways to promote switching, improve information for customers and punish banks who fail to treat their customers fairly.

Do the CMA’s proposed changes to the bank current account market go far enough?

No (72%, 1,082 Votes)

Don’t know (23%, 340 Votes)

Yes (6%, 86 Votes)

Total Voters: 1,508

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Useful links

Read the CMA’s retail banking market investigation – summary of provisional findings report (PDF)


Extract from Wiki: “Iceland had passed a law on 6 October 2008 – the day before the Landsbanki bankruptcy – that guaranteed full coverage of lost deposits for domestic Icelandic customers in the event of any Icelandic bank’s bankruptcy. At the same time, there was no guarantee for foreign customers of the same bank”.
So the UK government refunded its residents who had lost money (I’m not sure why because at the time, if I remember, savings interest was above the norm. If it is too good……?)
Certainly a “wise” move on Iceland’s part though :-).

Contrary to others’ experience, my wife and I have been satisfied with the service that Nationwide has given us for a joint current FlexAccount and several savings accounts, over a period of more than 25 years. We switched from Barclays in the 1980s because of bad service.

Our annual charges with Nationwide come to only a couple of pounds for running our FlexAccount, with all of our (modest) income passing through it every month. We have an arranged overdraft that is only used partially in occasional emergency, and the interest on that for a few days is the only cost to us. Furthermore, free travel insurance is provided for FlexAccount customers – that’s worth a bob or two.

I doubt that we would do any better with any other bank. Mind you, Nationwide continually asks us to ‘upgrade’ to a chargeable Flex+ account, with a few extra bells and whistles. I wonder how many long-standing FlexAccount customers there are like us, still with Nationwide.

Sam M….. here’s one ! I’ve banked at all the “Big Five” over the years, and left for the same reason : indifferent, ignorant, uninformed service; however, Nationwide are the best of the bunch thus far.

It’s odd how the public has rules and laws to obey and when they are broken, punishment follows. Institutions and businesses have voluntary Agreements and Codes of Conduct which is exempt from the law. These people make up their own laws however unfair or unjust they are, which are usually upheld by the biased, idiotic, corrupt court system.
The reason why the public are totally ignored is because people have become sheep, they have had dissent beaten out of them by the police, secret service and the courts. People are no longer willing to sacrifice and die or kill for a cause, as were our ancestors. Our rulers know this, so are indifferent to and even callous and scornful towards who they term as, the ‘peasants’. It WILL get worse!

Patricia A says:
24 October 2015

Corrupt banks should not be bailed out by the taxpayer and the perpetrators should be sent to prison.

The current government appear keen to impliment their ‘Charter for Budget Responsibility’, which would legally force future UK governments to run an absolute budget surplus. Basically, this means it would be spending less than it collects in taxes, seemingly having us (the taxpayer) at heart. So, if this would appear to be a fairly reasonable idea, why not also implement a similar charter which would legally compel future UK governments NOT to bail out banks and financial institutions with public money? I can’t help but wonder, is the government’s heart really with the taxpayer or the banks?

Once a bank starts to collapse [e.g. Northern Rock] the authorities have no choice but to prevent that and to throw a lifeline to rescue the depositors. The trick that eluded previous governments is to prevent a collapse in the first place through sufficient reserves, adequate controls, and strict regulation. Whether we have yet attained that happy state of no more banking failures remains to be seen. Letting banks go under, dragging down millions of personal customers with them, is a brave suggestion, and switching banks would then be a bit like Russian roulette. There has been no suggestion that Northern Rock was corrupt; it got greedy and over-reached itself. Other bank misfortunes have been due to improper behaviour that probably was corrupt because the intention was to manipulate the markets for both corporate and personal gain. Some heavy fines have been imposed on the banks but in most cases the individuals involved have been allowed to quietly leave the scene with their career and reputation in tatters. I would agree with imprisonment if it were funded by the perpetrators.

My husband and I have banked with Barclays for 30 years, they have never given us any perks like free insurance, but we always had an agreed overdraft, which we only ever got charged for If we went over it. Now and for the last 6 months Barclays charge us as soon as we go into it, granted they do send me a txt to say I’m about to go into it, but to me what’s the point of having the overdraft. So I am now looking to change banks, as Barclays don’t appear to care about loyalty to long standing customers.

Dee, I’m surprised if you paid nothing when making use of your overdraft. Normally interest on the “loan”would be payable, wouldn’t it? Some banks I think do not charge for the first £few say, but let us know if you find a better bank. As far as I know, Barclays don’t charge interest as such but a daily fee after the first £15 you are overdrawn (which is free). It goes from 75p to £3 a day depending on the overdrawn amount.

I’m not sure that the answer is just to switch banks because some are not very good. We need them all doing a competent job, so I welcome the current efforts by Which?

Voting with your feet is effective – if you feel strongly enough. That applies to lots of businesses. You don’t have to deal with them. But judging by the report most people seem not to really care enough. Some might not like that statistic of 3%, but maybe that’s the way it is. I’m happy with my bank and the more who join it the merrier as far as I’m concerned.

Why should we have to put up with substandard companies, Malcolm? I’m fed-up hearing about vote with your feet and it’s time we kicked with them.

Which? recommends:
– Look at forcing banks to more proactively help customers who regularly use an unauthorised overdraft, as well as increasing compensation for customers who suffer poor service

–Regularly name and shame the worst providers for bad behaviour

–Consider how banks can put people in control of their overdrafts, for example by notifying customers before they go into the red

To complete my post, I’m happy with the service my bank provides but I do support Which? taking action to support the needs of customers who are less fortunate.

How about banks rewarding customers who don’t use authorised overdrafts?

Please can I have mine backdated, Derek?

If only other more important things in life could be backdated. 🙂

When there are better places to do business, whether banks or anything else, and you are dissatisfied then the proactive thing to do is to move. And there do seem to be better banks from people’s reports here.

As far as “regular users of unauthorised overdrafts” there is nothing to stop someone with money difficulties talking to their bank about the options available – including getting an authorised overdraft or reorganising their payment dates. Money is a personal responsibility and you need to attempt to take the initiative to look after your affairs. Regularly taking money from the bank that they have not agreed to is not only expensive, it is a little dishonest. What if you can’t pay it back? Would you shop in Tescos and expect to get to the checkout with £30 of goods and not pay for then because you hadn’t got the money?

3% only have changed banks – says a lot about the strength of feeling. I’m all for seeing services improve but let’s take some personal involvement in helping positively where it might be necessary.

It would be interesting to know the origins and destinations of the switchers, and the reasons for the switch.

We should not ignore the fact that a lot of people organise a change of bank independently, as I have done in the past over a period of two-three months, and this will not show up in the CMA’s statistics perhaps.

On the other hand, many new accounts are opened every year and it is likely that most of those new account holders have made some comparisons and decided where to hold their current account for a whole variety of reasons, sometimes more personal than financial. Unless their circumstances change or their choice of bank does something bad for them they are not likely to switch in a hurry thus reducing the number out of which a switching percentage can be claimed.

Some of the three percent who switched might have been people who decide to replace two accounts with separate banks with one joint account with one of them so the switch was not because of any dissatisfaction. Others in the three percent might have changed because of a change of job or location, again with no question of dissatisfaction arising.

It is quite possible that hardly anybody switches banks at all demonstrating almost total satisfaction with their choice of bank.

“It is quite possible that hardly anybody switches banks at all demonstrating almost total satisfaction with their choice of bank.”

That’s a good thought.

I have a colleague who recently switched to the Santander 123 account so he could get some interest on credit balances. However, while interest rates remain low, the potential rewards versus the potential risks and bother of such actions are finely balanced. Hence, the “do nothing option” that minimises risks may turn out to have quite acceptable costs.

And the £5 monthly charge [up from £2] being introduced in the new year for that account will make it unattractive for many I expect. But inertia will no doubt prevail.

It really depends on what you want a bank to do. Like others on this site I’ve had the same bank for decades. It takes my money, pays my bills and gives me a cash and credit card, a cheque book -which I do use – and provides me with a monthly statement. In return it makes a profit on the money in my account. If I chose I could bank on line too. I’m happy with this bargain. Others, writing above, need more from their banks and their concerns are just as valid as my contentment at the status quo. They are likely to move accounts more often than I am. I resent the inference that, by not doing so I am somehow a victim of bad banking and am letting the banks rip me off. However if Which can improve the banking industry, which has let the country down so badly, then I approve. I see that as a different issue to that of personal finance at a local level. In my experience those in root and branch are there to do their best for their customers They are probably as fed up with the banking industry as the rest of us.

I wish my husband & I could change banks. So dissatisfied with Barclays but because of extremely poor service from National Westminster Bank which has resulted in the demolition of our credit rating, we are not able to move. We are stuck with poor service and hideous overdraft charges. I have been fighting for justice for 5 years now. The FOS could not help but recommended I report NatWest to the FCA. What use has that done me. None. NatWest agreed a loan of £38,000 2 months after the RBS Bailout completing no credit checks and with no security. We knew it was not the right product but all the promises made should we struggle with repayments. A lie to get us to sign up so their Private Banking Team could get their commission. & we did struggle. I lost my job because of NatWest’s interference and now 5 years on are still being chased for repayment of a loan we cannot afford. It has nearly cost me my life and our mortgage is now stuck at Natwest and our bank account at Barclays. 27 years we banked with NatWest & we have been tossed aside like a piece of crap. & no one gives a dam.

Andrew says:
25 October 2015

Switching to save £70. Not worth it. Unless I get bad service I am staying. If the service is bad then i would switch even if it didn’t save money. Dear CMA you are asking the wrong questions. It isn’t all about money.