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Can the CMA’s banking remedies deliver better banking?

Bank fix

After a near two-year-long probe into the banking sector, the Competition and Markets Authority has today published its proposals to shake up banking. But will it be enough?

The Competition and Markets Authority (CMA) has today recognised that the ‘big four’ banks – Lloyds Banking Group, HSBC, Barclays and Royal Bank of Scotland – dominate the market, and consumers aren’t switching. In summary, the banking sector isn’t working for all consumers, and a shake-up is long overdue. So what’s the CMA’s fix for this?

CMA banking remedies

Broadly speaking, today’s proposals includes some welcome news for the more than 50,000 supporters who’ve backed our Better Banks campaign.

In a win for our campaign, the CMA has laid out plans to ensure banks do more to help people manage their money. We called on the CMA to introduce alerts for overdraft usage and grace periods to help people avoid charges – and the CMA has done just that.

A revolution in mobile banking to promote better and easier switching is the big news from the CMA’s proposals.

The new ‘open banking’ standard will aim to deliver the same services on smartphones as those found in high street branches. Applying for loans, overdrafts and mortgages should all be available via mobile phone, as well as being able to transfer money between accounts.

The aim of this proposal is to pave the way for new services that are better tailored to individual needs – for example, using a mobile phone app to manage accounts held with different providers and compare better deals based on banking usage.

You should be able to access the details of your entire finances through a mobile phone app by 2018. The CMA believes this will encourage more people to switch to better deals, but concerns have been expressed today about potential security issues.

Unarranged overdraft charges

Missing from today’s remedies were strong plans to directly tackle high unarranged overdraft charges.

While the CMA will require banks to set a limit on their charges, the proposal will allow banks to set this limit themselves. It will allow banks to continue to impose charges that can cost as much as a payday loan.

These charges remain problematic for consumers. Last month, we asked you here on Which? Conversation ‘Do you know how much your overdraft fees are?’ The majority told us they didn’t – 45% said ‘No, I have no idea what the cost would be’ and 20% said they weren’t sure. Only 36% said they knew exactly what the charge would be.

As Kim Marie explained to us here on Convo:

‘It’s not always avoidable – my council decided (incorrectly) that we’d been overpaid council tax benefit, they debited the amount they wanted back immediately, sending us overdrawn. It took me weeks to get the money back from them and a refund for my bank charges and compensation. I cancelled my direct debit for them and they now get paid late every month to teach them a lesson!’

Without stronger measures to control unarranged overdraft charges, they could remain at crippling high rates affecting some of the most vulnerable consumers. We want to see the financial regulator to review overdraft charges and crackdown on these punitive fees.

Better banking

Today’s proposals are welcome news, particularly with the steps outlined that aim to give customers better information and an improved switching experience.

However, we maintain that more will need to be done not only to increase competition but also to ensure banks deliver a better service for all customers.

We expect the Financial Conduct Authority to press ahead and implement these changes to help deliver better banking for consumers.

So tell us, what do you think of today’s proposals to shake up the banking sector? Do you think these will be enough?

Colin Parker says:
10 August 2016

Having only seen the headlines as presented by the various news channels, I do not seem to have heard about those of us who have not joined the mobile app age, and have no intentions of doing so. What improvements are there in these changes for us, who only want to use branches, only want to use cash (e.g. real money), those of us who have little or no ‘internet’ facility and for whom trust in the banking industry has been abused, mis-used and for whom banking fraud, by the bankers – for the bankers is now today’s ‘norm’.

The banks must have proper regulation all the time, we do not want another financial meltdown paid for by the tax payer.

Alas the Banks are & always have been, a law unto themselves. NOT until the Government actually place tight bounderies upon them, nothing is ever likely to change. Even the ombudsman seems to have little influence or does not want to upset them, taking little notice of what the public say about the behaviour of the Banks !!
If they were an industry, most would have gone to the wall many years ago !
They nearly bankrupt the country & what happens we bale them out to the tune of billions & nothing else changes ? WHY NOT ??

It is unfortunately a living fact that the banks are a LAW in themselves. They can make their own rules and charge as much as they like. They can charge substantial amount as fees for an unarranged over draft. The arranged overdraft fees are not any cheaper by the way. For a personal loan they can charge any thing fron 6% to 26% or more against the 0.25% Bank of England’s Rates to Banks on which they can borrow money from the Bank of England. There are no restrictions on their behaviour even if it is injurious to the interests of the nation. About £132 billion of British taxpayers money was spent to bailout the Banks since the credit crunch in 2008 turned into an economic crisis. But the matter does not end there. Barclays, RBS, UBS have together been fined more than £1.6 billion by British & American Regulators for fixing submissions to the London Inter-bank offered rate (Libor). FCA Fined Barclays £264,432,000 for forex failings. HSBC paid record $1.9 billion fine to settle US money-laundering accusations. Bank guilty of blatant failure to implement money-laundering controls and wilfully flouted sanctions, US prosecutors have said.

The story does not end here, the bankers can retire on pension of a million pounds or more. The point to be noted here is that our great Wartime hero Sir Winston Churchill was not so generously treated for saving our nation during the last World War? What is so special about the Bankers? If our Banks can not behave in a fully regulated and disciplined manner then the answer is Nationalise them immediately as a CENTRAL GOVERNMENT BODY . As Civil Servants they will get the usual pensions and usual rewards like all others in the Civil Service / Industry. If we were to sleep for too long the time is not very far when other corporate bodies in the food industry, public Utility Companies etc will become as powerful or even stronger than banks and this will just lead to the exploitation of the working class who are already suffering. I would request you to bear in mind the National Interests and give a thought to the points raised.

Couldn’t agree more. Girobank should have been expanded instead of being abolished and that would then have brought the greed merchants to heel. Instead, all but one of the mutuals have got into the same old round. Thank goodness for Nationwide, which is still controlled by its members.

The Girobank was an innovative, efficient and popular organisation within the Post Office. It was sold off to the Alliance & Leicester that was eventually acquired [after near insolvency] by Santander. Along with several others, the A&L had demutualised and got into difficulties with imprudent lending. There are still several mutual financial organisations around [Yorkshire, Chelsea, Leeds building societies to name but a few of those on our high streets] including all friendly societies [e.g. Liverpool Victoria – or LV= as it is now known] and many insurance companies [e.g NFU Mutual and Royal London].

Robert C says:
13 August 2016

and Coventry BS and Bromsgrove BS to name 2 more mutuals. What I notice in the branch is that they are nice people to deal with AND get the job done.

And there are still another forty-odd building societies mainly serving local areas but usually accessible on line for savings accounts. Some small building society are subsidiaries of bigger ones [e.g. Nationwide and Yorkshire both have a clutch of little ones] but they are all still mutuals. I think their time has come.

Not until there is the very real threat – that courts are seen to use – of sending Directors to prison for a minimum term of 5 years for these offences, will the banks change.

The other alternative might be for courts / regulators to base fines on a percentage of turnover / profit – so that if a company tries to run roughshod over UK people, the courts / regulators can take off a very large part of their profits for the past or future years.

Just like their own customers – money only becomes really important – when it is NOT in the bank account.

Monica Weatherall says:
10 August 2016

As a senior citizen I find the idea of being compelled to online banking by computer or mobile phone alarming and confusing. Also many of my friends don’t have a computer or use a mobile phone so would have to ask relatives and they don’t necessarily want to divulge their financial affairs to them.

I/we could not agree more. How dare the banks take the liberty of charging higher rates on everything whilst not only closing branches but getting rid of internal staff on tills and trying to force us onto their ‘supermarket type’ machines just to make even more profits, or as you say, online computer banking/mobile. Which I have never done and will never do. Yes, it is confusing but even more worrying is the increasingly devious hackers who get details to steal thousands from online accounts.
Until there is a bank out there which sticks to old fashioned service for the customers (leave the obsessive computer buffs to their own devices), I mean a bank manager on site at least 3 times a week and service by counter staff, I will not be doing any actual banking. What I have is coming out, all of it. (except for £1)

Try Nationwide if they have a local branch. I bank with them (I don’t have any other interest) and they should give you what you want.

Della Morris says:
12 August 2016

I agree . Nationwide are not perfect but a lot better than the big four .

Competition and Banks are like drug free sports and the Russian Federation: a fanciful dream that governments try to make us believe in, a tooth fairy for grown-ups.

Fletch says:
10 August 2016

There is no possibility of a UK government ever imposing any meaningful regulation upon the finance/banking sector until the links between political party funding, corporate and private wealth are a)removed and b)criminalised. It can’t come quick enough.

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Whatever they say the banks have no interest in the welfare of their customers and will use any trick they can to make money at the customer’s expense. They are in a privileged position and they cannot be trusted. The only answer is very tight regulation backed up by serious sanctions. In particular there must be personal sanctions against managers and directors who deviate from a strict code of honesty and ethics. They do not have a right to act dishonestly ‘within the law’. Dishonesty itself should be a crime.

I have absolutely no problems with Nationwide. It has not, in my experience, acted dishonestly or illegally. If people do not like their present bank, then move – it is not difficult.

What “welfare of their customers” do you have in mind?

Robert C says:
13 August 2016

I have ticked the boxes NOT to be phoned by my bank, but have caught them out when asking me to pop in for a review of my finances. Curiously all 3 times this has happened has been 1 day before a large payment arrived (endowment policy matured etc). It does not yet show on internet banking – but they can see it in the pipeline. A VERY privileged position indeed! (I did report them to the Ombudsman – I won). I now keep my savings in a mutual and let the bank do the admin of paying bills. I do not let them forget that they were caught red handed.

I am very happy with my Banks service. When I wanted a loan I got one. I have a phone number to speak to a local branch on the understanding if they are busy they will ring back, they always right do. It is wise to keep a record of expenditure d balance the bank statement on a monthly basis. Banks could offer some software to help their customers. Which might consider this, after all I think it started TAX CALC.

As usual it is crumbs. I thought that we had MPs and financial bodies to help sort this out. Closure of branches, App’s for mobiles communications via computers? Whatever happened to ‘Service’, I thought that banks were part of the ‘Service Industry’ and where is the defence of ordinary customers? Large pay rises at the top, large profits and bonuses? I hope that you continue to put pressure on the banks and speak for people with little clout, more power to you.

Agree that we do not want banking by phone, mobile or otherwise, and prefer to make withdrawals and deposits in our local branch, or by e.g. direct debit or credit card . Alarmed by talk sometimes of phasing out cheques – how else can we pay local tradesmen ?

At Eighty years of age, Counter service is of the utmost importance.

Fifty years as a loyal customer must count for something, or does it?
Only just got the hang of VCR never mind Aps, what ever they are.

Good for you, Stone Broke

Mountains in Switzerland I believe.

Loyalty is a one-way street.

Banks, like many other institutions, hide behind obscure “terms and conditions,” as soon as I see that expression I know that that institution is saying that the customer is always wrong and the customer pay very dearly for any minor mistakes make.

All this hiding behind such verbiage (usually these terms are pages long in small print impossible for us older people to read) should be made illegal.

I’d like to see independently approved “standard terms and conditions” ,where any ambiguities and tricky bits have been corrected, that all banks use. Any variation from them should then be clearly spelled out.

I see no reason why these standard Ts & Cs cannot be on one or two sides of A4 in normal sized type. No get out clauses, no vital clauses buried on page 19 of 47, no “refer to our full terms”. This should apply to the entire financial sector when dealing with the general public and small businesses who don’t have an army of lawyers to scrutinise every page.
For example why does the RAC need over 40 pages of fine print to tell you when they will, and more importantly, when they won’t come and help you? Because they are an insurance company with profits as the first objective, not a motoring club with its members interests at the heart.

The government needs to be more involved in the running of banks at the moment the banks are running us into another banking crisis if we don’t take control of this greed and corruption.

The notion that it would all be better under direct government control is curious to say the least.

I am out of touch – what are the latest greed and corruption issues? Falling profits is my biggest concern as it will lead to closed branches, reduced services, and higher charges.

Information about these charges and others are pathetic. Today on my statement I read ” Returned DD . . . . .Charge £20″ with no detail as to what/who it concerns and I have to ring-up to find out. Also we can never have fair banking ( including building societies’ banking services ) until we have a cap on the ridiculous bonus scheme practices which for some unknown reasons are endemic in financial services. A bonus should relate to the dictionary definition of being “a bit of extra pay for exceptional work over and above the normal expectation” : in other words capped to, say, 30% of normal salary, with specific details given of the exceptional work done or extra positive performance achieved. Nationwide BS bonuses to directors and senior executives are regularly in the order of 80 to 100% of salary and can go up to 160% : in other words, a doubling of salary which is hardly a bit extra ?! E.g. the CEO’s last annual salary was £875,000 ( nearly six times the Prime Minister’s) and the last total remuneration package was £3.4 million – how wonderfully ‘mutual’ is this society ?? And again, non-executive directors, many who have other boardroom ‘gravy train’ appointments get from £65,000 p.a. to £135,000 for merely attending some 10 to 15 board or board-committee meetings !? Talk about investors/customers forcibly supplying ‘money for old rope’ ! It’s got to be the time surely for some real democracy in banking with staff reps and customer reps being elected – not appointed – for boardroom places especially on remuneration committees ?! Join the BSMA and join in the fight ( http://www.bsma.org.uk )!!

In general I agree with you Alan. But what is the right level of remuneration for the head of an organisation like the Nationwide BS? Let’s say a counter clerk earns £20,000 basic, should the CEO be on a 10 x multiple [£200K], on 20 x [£400K], or – as he is – on 40 x [£800K+ – does that include employer’s pension contribution?]. Does mutuality mean lower pay?

Boardroom pay is a circle of self-fulfilling prophecies because the directors are usually on other boards as non-executives where they might participate in the remuneration committee deliberations and, sub-consciously or otherwise, will not rock the corporate boat.

What about the car, chauffeur, lunches, expenses, allowances, London apartment, and other BIK – what do they amount to?

There is a reason they pay large bonuses. If say you valued an employee and gave them a big pay rise, that rise will need to be paid each year with possible more rises on top. Yet if you pay a large bonus the liability stops there you’re not forced to pay it again next year unless of course they’ve deserve another one.

It defeats me why some private companies and their employees feel that it’s perfectly acceptable to be paid large extra amounts simply for doing the job for which they’re already handsomely remunerated. The fact that Which? itself indulges in the practice is depressing in the extreme. And of course it only applies to already well-remunerated employees, but never to people whose jobs really matter in the world – a state of affairs which not only graphically demonstrates the value society places on the financial industry but also reveals the disingenuity involved in certain employments.

By that same standard Doctors, Nurses, Teachers, Social workers, Midwives and Health visitors clearly do jobs which are considered utterly unimportant. And we wonder why we have to recruit from abroad.

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“the CEO’s last annual salary was £875,000 ( nearly six times the Prime Minister’s) ” Maybe that’s why we have such awful MPs! Anyone with any gumption is in the financial sector fleecing the customers.

For example:
“The Department for Education (DfE) paid out £1.7 million in bonuses last year – with top civil servants pocketing up to £17,500 for good performance.
Figures released last month by the government also reveal Ofsted civil servants received bonuses of nearly £900,000.”

“An astonishing 50,000 Health Service employees are on six-figure pay deals, with one hospital boss earning more than £1.2million last year.”

Read more: dailymail.co.uk/news/article-3309596/The-shocking-scale-fat-cat-pay-public-sector-exposed-today-major-Daily-Mail-investigation.html#ixzz4HFPuPAL7

Perhaps this money would be better spent on the “troops”? Not just restricted to private business that at least pays high salaries and bonuses out of profits, not out of your and my tax. And we mustn’t overlook charity pay and bonuses.

Yet another useless regulator that fails to act in consumer interests and comes up with a silly app to solve the problem.
Why don’t they deal with foreign call centres that have a poor command/heavy accent in English. How about the security aspect, they call me, they know who they are calling, then ask me to provide them with security information, I don’t know who they are and I want to verify them FIRST, exactly as they would, when I call them. No company or government has any arrangements in place for the person being called to be able to verify the caller. I now have 3 utilities that must email me as they are unable to put reasonable security measures in place for using the phone to contact me. It is far too easy for scammers and fraudsters to obtain information this way and I won’t allow companies to put me in that position.

Why not just tell our banks to give us an option that if a payment will make us overdrawn then the bank does not pay it and only if we want to be informed of that non payment there will be a charge. Customers have to be responsible as well and plan ahead. Maybe when a bank account is opened they provide a leaflet about budgeting. If we are going over our budget by a few pounds or even £100 each month then we need to cut back and maybe not have that phone with its high minutes to chat, or that TV with its TV license, or that dog that costs £40 a month to feed maybe, or that bottle of wine every week. Having seen the “benefits street” on TV and the supposed “poverty” when they have 2 or 3 dogs when on benefit, that is not poverty,

Linda – I think customers can ask their bank not to honour cheques or not pay standing orders if funds are not available but direct debits are different because they are initiated by the payee’s bank under an agreement that you enter into [possibly unknowingly] when you authorise a DD facility [that is one reason why DD payment sometimes involves a discount]. There are charges for dealing with returned cheques and much heavier ones for returned DD’s because two banks are incommoded. Creditors due for DD, SO or cheque payments can also apply sanctions [like account closure] or sue for payment. This reinforces the point you make about customers having to be responsible for their financial affairs.

I caught a snippet of a programme on TV about private tenants who are dependent on benefits to pay their rents and, because of changes in the way housing benefit is now administered with local councils no longer paying the landlords direct, finding themselves in arrears for six months or more. Images showed whole streets of tenanted properties with rent arrears a serious problem but a satellite dish on every one of them. The landlords have no choice but to tolerate it because the alternative is empty properties. So, basically, satellite broadcasters and mobile phone companies are trading on taxpayer-funded benefits in many areas [I suppose there is a silver lining – the Exchequer gets 20% back in VAT].

As regards satellite dishes, they are likely to be more or less universal in areas where terrestrial TV reception is poor or non-existent.

In those circumstances, the dishes can actually have been provided by landlords or (charitably?) left behind by previous occupants who were not on benefits.

Once a dish is available, the cost of a set top box for free satellite TV is not greatly dissimilar to the cost of one for terrestrial TV.

Hence, although a picture of a row of houses, all with satellite dishes might create a strong strong inference of occupants enjoying “champagne lifestyles” with expensive pay-TV subscriptions, the reality can be somewhat different.

I wish the tenant next to me would stop paying his rental of £1,200 pcm until his landlord agrees to prune his tree so that I can once again receive a signal to my satellite dish from April to November.

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Agreed, Derek – We should not jump to the conclusion that everyone with a dish is watching subscription services.

Could be Freesat like ours.

However, as around half of UK households seem to subscribe to Sky John may have a point?

I am far from an expert on this before anyone jumps down my neck. What I say is from “a former hard working adult to a now vulnerable person’s point of view whilst being a Halifax customer” due to their errors with my mppi claim which caused arrears on my mortgage and their constant errors when dealing with these arrears on my mortgage, plus enforcing a possession warrant in July, which a judge threw out of court (warrant to be struck out) as possession had been set aside over a year ago” they have destroyed my life and have forcing me into even more financial difficulty & ill health, they don’t care as they know I can’t afford legal representation and Civil Litigation is expensive. Plus The Financial Ombudsman are corrupt leaving the banks to do what they want to vulnerable people like me.

Alan Wiseman says:
11 August 2016

It’s all well and good talking about apps for this and internet banking and banks should do this but what about people that can’t be bothered to swap to save what is in effect a pittance in the overall scheme of things. People don’t want to chop and change which is what is being suggested and proposed, they just want a fair deal! It’s exactly the same with the energy situation.
People just want to be treated fairly!!
Let’s stop this swap to save. After all you swap to one provider and then within literally days or weeks, you almost need to swap again!
The older people can’t be bothered as they see it as too much trouble so how do the various regulators overcome this? Do they ever talk to people about what they’d like to see or do they just try to justify their roles by suggesting this and that?!? get real!!!!!!!!!!

Alan, I have been with Nationwide for many years and have been very satisfied. I have found no need to chop and change. As you say, it can be pretty pointless worrying about a small difference in interest rate perhaps, so no need, once you’ve found a decent bank, to consider changing.

The same applies to energy suppliers. Once you have found a decent fixed term fixed price deal and changed from a standard variable tariff, there should be no need to consider changing until your deal is coming to an end – after a year.

We can make too much fuss about about making changes when they are only sensible once in a while..

As someone who finds mobile phones difficult to use at the best of times, I would be afraid that the banking details on the propose apps would be all too easy to hack.

Keith S says:
11 August 2016

Disturbed to see in headlines the recommendation that my financial data would be shared to other lenders. If my bank does that without my agreement I will swiftly move to a business that is not so free with my data. I am quite capable of arranging to find a more suitable banker (or utility provider) without the help of the so-called experts who take years to come up with ideas almost any sane person already knows