Monday, September 12, 2011

Bank reform: customers are being bamboozled by complex charges, Vickers report says

Britain’s biggest banks are bamboozling current account customers with opaque charging structures, according to the Independent Commission on Banking (ICB).

Banks need to make the pricing of current accounts more transparent and there needs to be more competition in the market to improve choice for consumers, according to the commission's final report, published today.

The ICB, headed by Sir John Vickers, said bank customers found that the opaque charging structures on many current accounts – particularly in relation to overdraft charges – made it difficult for them to identify which account would be the most cost-effective.

It recommended that there should be a strong new challenger in the market to provide a more competitive alternative; there should be a new switcher service introduced – to make it easier for consumers to move accounts – and the new regulator, the Financial Conduct Authority, should have a primary duty to promote effective competition.

The complex pricing of current accounts – particularly for overdraft charges – has made it increasingly difficult for consumers to identify which accounts offers them the best value for money, according to some respondents to the ICB's interim report. One even went so far as to suggest that banks designed these complex tariffs to hinder the ability of consumers to shop around properly.

Overdraft charging is particularly opaque, with some banks charging a flat fee for each day customers are overdrawn while others continue to charge interest. more