Banks told: give customers a single statement of charges over a year

[Legal Beagles]

Pressure is on as Competition Commission wants a UK-wide change. Miles Brignall reports

More...

[Amethyst]

Re: Banks told: give customers a single statement of charges over a year

Bank customers across the UK could soon receive an annual summary detailing exactly what they paid in charges and interest, if a Competition Commission proposal is adopted by regulators.
This week the commission, which has spent the past two years investigating whether bank customers in Northern Ireland get a fair deal, concluded the banks should be forced to present their customers across the UK with an annual statement.
It argues that customers presented with a single list of all the bank charges they had paid over the previous year would be more likely to question whether they could get a better deal elsewhere, and possibly switch.
The Competition Commission report came out on the same day that the Co-op published a report claiming half of consumers are unhappy with their bank. Consumer group Which? said those who have accounts with the big five - Barclays, HBOS, HSBC, Lloyds TSB and RBS/NatWest - could typically save £220 a year by switching.
Following its investigation, the commission said this week it wants the following changes made by banks operating in Northern Ireland.
The banks must:
· Provide clear information on the levels of charges and interest rates and how and when they are applied both before, and when, a customer opens an account.
· Provide every customer with an annual summary of the charges they have incurred and of interest paid and received.
· Give customers at least 14 days' notice from the date of their statement before charges and debit interest are deducted from their account.
· Remind customers annually of their right to close their account or switch.
· Introduce improvements to the switching process, including offering a charge-free and interest-free overdraft facility for at least three months.
The commission said the measures relating to better and clearer information must be in place in Northern Ireland by April, with the remainder being implemented by October at the latest.
Christopher Clarke, chairman of the inquiry group, said he hoped many of its remedies would be adopted across the rest of the UK.
"In reaching our decisions, we have worked closely with those on other complementary initiatives including the review of the Banking Code and, most recently, the Office of Fair Trading's market study into personal bank current account pricing - all of which cover the whole of the UK.
"We would expect both the independent review of the Banking Code and the OFT to consider carefully the implications of our conclusions and decisions for their own work."
Meanwhile, people who still have accounts with the big five banks could save money and get better customer service by ditching them and switching to another provider, according to Which? Money.
It found that just nine of the 64 Which? Money best-buy savings accounts, loans and credit cards are available from the big five banking groups.
It said most people could earn an extra £50 a year by switching their current account, and £220 by switching their savings account.
In a recent Which? Money survey, just 40% of Which? members who held a current account with Barclays, HSBC or NatWest were very satisfied with their bank, compared to 80% of Smile customers.
Martyn Hocking, Which? Money editor, says: "It would be easy to understand why people stick with the big banks if they offered good rates or excellent customer service, but our research shows that all too often this isn't the case. Now's the time to ditch your account and get a better deal - and better service - elsewhere."

[Amethyst]

Re: Banks told: give customers a single statement of charges over a year

from competition commision
Banks response considered (ref NI banking)


It told us that including this information on the Annual Summary would require additional and expensive IT development the cost of which was not included in its original estimate of the costs of implementing this remedy, which did not originally form part of this requirement.


30. We accept the argument advanced by the banks that information on historical interest rates and historical charge levels will not be readily available to them at the time the Annual Summary is compiled. We note that the intention of our Annual Summary remedy was to ensure that customers had an understanding of the costs of operating their account over a 12-month period, and we do not consider that historical interest rates are likely to be critical to this understanding. Indeed, on reflection, we consider that including all the rates of interest that had applied to an account over a 12-month period could result in too much information being included in the annual summary.


31. We have therefore retained the obligation on the banks to include in the Annual Summary the total amount of a particular type of interest paid and a particular type of charge incurred on the account in the 12-month period (or paid to the account in that period) but we have amended the Order so as to ensure that banks are not required to include in the summary the level of the rates and charges that applied to the account in the 12-month period. However, the Order now includes a requirement on banks to include the level of the rate or rates and charges that applied to the account at the date of the Annual Summary and to make clear to customers that these rates may have changed throughout the period. Banks must also make clear to customers where they can find information on the rates and charges that may have applied to their account over the period covered by the Annual Summary.



We consider that, provided a customer receives a Record of Charges and Interest that covers a period of at least one month up to the date of that record, customers will have the information that they need. We have therefore amended the Order (see Article 9(1)) to provide flexibility for banks to provide a Record of Charges and Interest that covers more than one month.








So not as simple as the banks sending customers a list of charges and interest incurred over the 12 months in plain intelligible language.

[Amethyst]

Re: Banks told: give customers a single statement of charges over a year

There is some good stuff - specifically regarding SWITCHING accounts, and that a three month period after opening account charges etc are considered more with regards failures in the switching process.

We have therefore amended the explanatory note (now paragraph 57) to make clear that a bank must refund a charge that is the result of a failure in the switching process whether that charge has been 8
identified by the bank itself or brought to the bank’s attention by the customer. However, we have also made clear (in the same paragraph) that the bank should refund any such charge whether or not the customer can prove that the charge has been incurred as a result of a failure of the switching process.

lol @ The Banking Code is a self-regulatory tool and it is open to the banks to make changes to it. We therefore cannot rely on the Banking Code to give effect to our remedies.

[Amethyst]

Re: Banks told: give customers a single statement of charges over a year

Oh yes the docs...


The bit they are responding too - Northern Irish personal banking - Final report
http://www.competition-commission.or...order_2007.pdf

The response response. http://www.competition-commission.or...nsultation.pdf