Banks agree to 'charges clarity'

[Legal Beagles]

Banks have agreed to make current account charges clearer and make it easier for customers to switch, a watchdog says.

More...

[Budgie]

Re: Banks agree to 'charges clarity'

Banks agree to 'charges clarity'


Bank customers will receive an annual summary of charges

Banks have agreed to make current account charges clearer and make it easier for customers to switch, the Office of Fair Trading (OFT) has said.
The changes, which include providing an annual summary of account charges, come after two scathing reports into "opaque" banking fees.
Banks should be putting the new measures in place by 2011.
In the meantime, they will also make it easier to shift direct debit payments from an old account to a new one.
"As consumers become more aware of the costs of their account and more confident in switching as a means to get better value," said OFT chief executive John Fingleton.
"Banks will need to offer more competitive and innovative products and services to attract as well as retain customers."
Many customers are put off switching current accounts because of the potential hassle of moving their direct debit payments to the new account.
The new measures plan to make it easier for this to happen.
Review
In July 2008, the OFT found that personal current accounts were "not working well" for consumers. Many people were unaware of their account's interest rate or what they paid in charges.
The OFT estimated that the banks earned the equivalent of £152 for each of the 54 million active accounts in the UK in 2006.
The complexity of the £8bn industry meant customers were less likely to switch banks.
In September 2009, the European Commission said that information given to some banks' customers was "incomprehensible" and fees were "opaque". It said only 9% of EU consumers switched accounts in 2007 and 2008, compared with 25% of car insurance customers.
Now the banks have agreed to a new system which allows UK customers to compare the interest gained and charges made on funds in their current account.
Each year - probably from 2011 - customers will receive an annual summary which explains how much interest they have been paid and how much they have been charged for services such as overdrafts.
The OFT said that this would allow people to compare the prices and benefits of different accounts and so make them more likely to switch providers for a better deal.
Charges will also be "more prominently displayed" on customers' monthly statements.