OFT report slates current account providers

by Gill Montia

Story link: OFT report slates current account providers

The Office of Fair Trading (OFT) has completed an investigation into the UK banking sector’s provision of personal current accounts and has concluded that many consumers do not know how much they are paying in charges or the rate of interest they receive on their current account.

There are estimated to be 54 million active personal current accounts in the UK and according to the OFT’s analysis, banks earned the equivalent of £152 per active bank account in 2006.

The £8.3 billion collected represents more income than that raised from savings and credit cards combined.

The watchdog found that £2.6 billion came from charges levied on customers with insufficient funds in their accounts. Meanwhile £4.1 billion was gained through interest rates.

The report blames complexity and lack of transparency on behalf of the banks for the fact that only 6% of customers surveyed had switched accounts in the past 12 months.

The OFT also warned consumers that banks offering “free” current accounts are actually charging their customers the difference between the interest made on their money by the banks and the derisory levels paid on funds in most High Street current accounts.

Speaking on the BBC’s Today programme, the OFT’s chief executive, John Fingleton, said that the personal current accounts market is not serving consumers well and he will be urging providers to make information clearer to customers.

He added that if banks do not cooperate, it will be very difficult to avoid regulation in the market.

The British Bankers’ Association has expressed disappointment with the OFT’s report.