Last Tuesday, I appeared before the House of Commons’ Treasury Select Committee to give evidence on the Competition and Markets Authority’s banking inquiry.
Alongside me were representatives from Atom Bank and Tesco Bank, and it soon became clear it isn’t just Which? who feels the Competition and Markets Authority’s [CMA] work fell short.
Why does it matter?
As previously mentioned, Which? is concerned that the CMA failed in its report to go far enough. It’s long been clear that the banking sector isn’t competitive enough, resulting in poor outcomes for consumers, so seeing the CMA going through a long and detailed investigation, only to provide seemingly rushed remedies, is a real problem.
This issue became clear multiple times in the session with the MPs digging in to issues around unauthorised overdrafts, free-if-in-credit accounts and switching, among others.
Unauthorised overdrafts are a key area of concern for Which?, with some banks charging four times as much for an unauthorised overdraft than a payday loan, raising the sector funds of over £1bn per annum.
In a clear shortcoming, the CMA has simply suggested that banks cap unauthorised overdrafts to a level they themselves can set. A clear example of marking your own homework if ever there was.
What can be done?
Of course, spotting the problem is only one part of it, and there was a real appetite in the committee to find solutions for the problems the CMA had failed to address.
For unauthorised overdrafts, the ball has been dropped, but a real opportunity lies in the Financial Conduct Authority’s [FCA] upcoming review of the pay day loan cap, which is due to take place in January.
Happily, the committee were keen to understand what role they could play, and there certainly is a need for a strong voice in Parliament to support the FCA taking on this work and finding effective remedies.
Stepping closer to better banks
Such issues do have to been seen against a back drop of overall change in banking. For too long banks have done what they have to do, rather than what they should do. Changing this will take time, but hopefully by tackling one issue at a time, and using sessions such as this one to shine a light on what still needs to change, we can get a better market with real options for consumers.
What more do you think can be done to improve banking?
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