/ Money

Have the CMA’s banking fixes fallen short of the mark?

Bank fix

The Competition and Markets Authority (CMA) has today unveiled its grand plan to improve competition in banking. But we think the proposals have fallen short of the mark.

Back in October, I wrote about the CMA’s recommendations for improving competition in banking. And it’s fair to say pretty much everyone, including many banks themselves (well the challenger banks at least), was left feeling underwhelmed.

But to the CMA’s credit, they did say they’d go away and take suggestions on board. Well today’s new, updated proposals show that sadly, not much has changed.

Better banks

The problem is that the cost of using a current account depends on how you use it, but charging structures can be complicated, and pretty expensive if you slip into an unarranged overdraft. And despite banks rarely achieving decent satisfaction ratings, people don’t switch, leaving the big four banks with a dominant market share.

So if you throw in relatively low satisfaction, disillusioned customers thinking all banks are the same, and a small group of customers being charged through the roof, but not switching and not being helped to manage their situation, the diagnosis is not good.

Now there are some recommendations in the CMA’s report (PDF) that are undoubtedly good.

Recommendations like making banks regularly prompt their customers to check they’re getting good value from their provider, and making switching easier, are sensible housekeeping stuff that, in truth, banks should be doing anyway.

There’s also already been some good progress made on a new app to help people compare what bank is best for them, based on their actual account usage. Plus proposals requiring banks to alert people when they are about to go into their overdrafts, and giving them grace periods to avoid charges – these are certainly welcome steps in the right direction.

Fallen Short of the mark

But where the CMA has fallen short is what they’ve billed as a ‘cap’ on unarranged overdraft charges.

In reality, it’s not much of a cap. Banks are only being required to set their own maximum monthly charge and disclose this to their customers. It fails to mention that some banks already have a limit on the monthly cost of unarranged overdraft charges.

Also, while the CMA believes that transparency will help customers compare and encourage them to switch to a cheaper provider, it does so in the knowledge that heavy overdraft users are the least likely group to switch.

And if any of you are wondering about customer service in banking – well the CMA is proposing to require banks to display a small number of core indicators of service quality, like willingness to recommend the bank to a friend. There are also proposals to publish other quality measures to help people compare between providers.

But it’s not yet clear how this will work. What we’d like to see is some customer engagement, to test whether the information being presented is what people actually want to know.

Next steps

While this is technically only the CMA’s provisional decision, after almost two years or investigating and rejecting calls for stronger action, it’s unlikely it will change its mind.

So it’s now over to the Financial Conduct Authority to implement the CMA’s remedies and judge whether they go far enough.

What do you think? Do you think that this a missed opportunity to improve banking?

Do you think banks that hit customers with unfair charges should be held to account?

Yes (99%, 4,903 Votes)

No (1%, 38 Votes)

Don't know (0%, 13 Votes)

Total Voters: 4,954

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Kevin says:
17 May 2016

The banks are deliberately profiting from acts of fraud why has no member of any board of any of the banks been sent to jail. I honestly think are politicians are involved with this corruption

Yes I do think something is going on here and it is being hidden under the carpet. Politicians are in the cover up.

I agree about the jail question, two years ago I sent 3 angry letters on this very subject to my MP, the chancellor of the exchequer and the shadow chancellor, all were ignored! If I, as a humble engineer had messed up on this scale, I would have been in jail quicker than you can say ‘hedge fund’

High Loan & overdraft charges, terrible or no interest on savings accounts.
Excess & unjustified Bonuses & Management salaries.
Short working weeks and closing branches.
Greedy CEOs

Sue says:
17 May 2016

As is usual in this world the rich get super rich and the poor get super poor it will never change!!!

It can change but it will take a concerted and united effort by hundreds of thousands, if not millions of people – a people’s revolution. But that is unlikely because too many people either don’t care (enough are wealthy enough not to be affected by anything anyway) but most people are either scared or completely ignorant and that is how the establishment under this government keeps the status quo in favour of the wealthy and big business.

They use the savers money to lend out @ 4-5% the offer a return of 0.02%
They should be prosecuted for what they have done to the Banking system.
Then they offer cut priced shares to their friends and the corrupt M.Ps

FCA is paid by the banks….can you see a problem there????

I think if Bankers are shown to be unfair they should be dealt with very severely.

Why are the Fred the Shreds of this banking world not in court? Why are savings rates being held so low? Why are totally unjustified bonuses thrown around like confetti to so-called ‘top brass’ executives. Why are we all so stupid to let this happen with our money?

I think we should all wake up to what is going on and sign petitions. The bankers will learn their lesson when appropiate action is taken and when some of them have been jailed.

Savings rates are very low because the banks do not need our money. They have access to all the money they need on the wholesale money markets where rates have dropped to very low levels. It costs the banks far more to attract and gather in money from a multitude of little savers whereas they can pick up billions to balance their books overnight in the national inter-bank and international markets. We would be in a far worse position if our banks were fundamentally unprofitable so, disagreeable though it is, there is virtually nothing we can do about it. Ultimately it is due to the Bank of England’s monetary policy of low interest rates to manage inflation and to restore confidence in the banking system following the financial turmoil that started around 2008; the method [or contrivance] used on this occasion is known as ‘quantitative easing’ which creates liquidity through the medium of government assets and bonds with the intention of stimulating private sector spending. It was supposed to be a temporary situation.

I think it is extremely punitive on us older customers who are not mobile phone users that only text messages are sent as a reminder that we might unknowingly be going into an Unauthorized Overdraft position and at a cost of £5 per day by my bank, this could become completely out of hand if I wasn’t keeping a check on it.

M. Malaviya says:
17 May 2016

……….little consistency in rates for fx transactions, additionally, expensive fees for fx transactions for individuals.

The CMA only make recommendations, not obligations. But it has always been the same in the financial sector, and nobody and no rules will ever make them change their approach when it comes to ripping the people off. This government and also the previous Labour government have done nothing to make things fairer, they support rip off scams by banks because they benefit from more tax revenue. Not a great deal if anything will change, simply because of the easy profits. But we also have to remember that some banks were bailed out by taxpayers money, (not the governments money, ours) and we want it back. To that end the government will let them come up with even more devious schemes to rip us off and so nothing will be done about new schemes for years to come. The only way is for new rules and the will to enforce them, but that won’t happen, and especially with this government wanting to hold on to the bankers rather than see them relocate to countries with few or no obligations.

I guess the 1% saying NO is a Banker???

I totally agree with all the comments above.
One further point, whenever you put a cheque into your bank it takes 3/4+ days to clear, and the bank, as I understand it uses these to earn interest.
If this the case, it should be stopped, and one should have immediate access to it.

C. says:
17 May 2016

No point fining institutions that have the legal financial facilities to make money out of credit (eg.thin air). Consider too how ittle has really happened in light of the corruption that has already been exposed in this sector.
They really are getting away with little more than a slapped wrists, for destroying the economy.

Which has folded businesses, left families without incomes, leading to homelessness and a reliance on the welfare state to pick up the pieces, of their mess, and for how long??

So why aren’t there by now more effective ways of trade regulation and correction being used or introduced such as critically reviewing and/or limiting their existing credit licences in relation to the harm they have been found to cause, etc?

Alan says:
21 May 2016

C. you clearly display that you nothing about how the economy works (money out of credit – thin air).
Do you have a mortgage, a credit card, a loan, an “interest free credit deal”?
Perhaps you don’t but others do. That money has to come from somewhere, generally depositors looking for a safe haven.
Describe the corruption – one person has been convicted.
Destroying the economy. This is a good one. I always ask when in a debate about this and find that not one person can explain in simple terms how that banks singularly have destroyed the economy, I look forward to yours.
Folded business. This is complicated I admit, so lets try.
It takes two ( sometimes more) to set up an arrangement whereby a business borrows money. It is the borrower responsibility to manage their business in such a way as to make a profit. That’s what is left after all the bills, and the wages have been paid.
If that business goes bust what should the bank do? Should it try to recover money for the depositors or just let it go and write it off. The complicated bit is where we have “zombie” businesses. Should they be propped up or let go to the wall? Within all of this the regulator, in trying to make banks safe in effect imposes what in simple terms is a credit score on borrowers. If that score is too low then there is is perception that the risk is too high and the bank should exit because it costs too much. Some borrowers understandably get very bitter about this saying that their business is viable. But if it was then they should be able to raise finance elsewhere – 9.5 times out of 10 thet cant, so who is right?.
Believe you me, regulation is rightly very stringent these days. This should ensure confidence in the sector making the UK the safest in the world.
Yes some sales have been wrong but even with PPI (which was not wholly wrong) it’s provided refunds at a level you would never get in any other industry (you got a VW – are they going to give you your money back?). Created “have you got PPI” firms as well, like them or not jobs are created even through this.
And lastly if you still have a problem with the sector just think about the contribution it makes to GDP.
hope this helps

The point is, Alan, that banks have to be judged on much higher standards than other companies because their stock-in-trade is trust and reliability. They have spent a century representing themselves as rock-solid institutions [with the masonry to match] and they are now providing services to virtually the entire adult population [with half the premises and a third of the staff of fifty years ago] so it is not surprising that a lot of people feel badly let down. Leaving aside the contamination from the wholesale end of banking and corporate finance, retail [high street] banking is not a pretty sight on just its own terms with up-selling, confusion, small print, and abstruse t-&-c’s the order of the day. And that’s before we get on to people’s dissatisfaction with the low returns on their savings and high charges for loans, authorised or otherwise.

Yes a case do as we want to pot with customers

Alan Stanley says:
17 May 2016

It’s yet another case of profit by deception, why can’t a government get on top of this and put an end to this receit.

Because it’s not in their interests Alan

Jennie Bowie says:
17 May 2016

Banks should look after low paid and not just upper over levels
Help lower paid or nil income.

Jim says:
17 May 2016

Banks make profits – they really don’t care how they make the profit so long as they make ever larger profits for their shareholders – They will argue that lower income recipients may be reliant upon a pension provided by the shares – no profit, no pension income -Welcome to “Rip Off Britain” courtesy of successive governments and the FCA (does that stand for Fornicating Con Artists?!

Banks change the date of DD’s allegedly to help their customers. so they can make more charges. This puts you overdrawn so yet more charges . I believe its to get people into debt and shackled to them. When I ask to change my direct debits back to the dates I set, I either cannot or it will result in more fees.

Nigel Johnson says:
17 May 2016

Unlike Iceland where they jailed some 26 bankers for corruption, we here in the UK have yet to see one single SENIOR banker brought before the judiciary. Furthermore, Icelands PM had to resign over his involvement with the Panama Papers scandal/revelations! Notice the difference between Iceland and the UK??

Well done Iceland, a country with morals

Angus says:
17 May 2016

It is the same the whole world over its the rich that gets the pleasure its the poor that gets the blame and its just a bloody shame

Complete rip-off. I was charged £35 for a returned cheque. We invest 10’s of £1000 and get a pittance in interest.