Today, the Financial Conduct Authority (FCA) responded to the Competition and Markets Authority’s (CMA) investigation into banking, and it’s good news. While the CMA found problems with high street banking, its remedies were disappointingly weak. However, the FCA has agreed to spur improvements in the sector using initiatives such as:Updating bank customers on their banking and overdraft use Helping people to compare quality of service from different banks Investigating the cost of overdrafts (both authorised and unauthorised) alongside payday loans
Last week, our CEO, Peter Vicary-Smith gave evidence to Parliament about the CMA’s inquiry. He called upon the FCA to step in and look at pernicious unauthorised overdraft fees. Happily, today it’s agreed to do just that.
This is real progress, as Which? found an unarranged overdraft can cost up to four times as much as a payday loan. Our supporters and members have regularly raised their concerns around the level of these charges. Given how hard they hit people who are already financially vulnerable, the system clearly can’t stay as it is.
Vickie Sheriff, Which? Director of Campaigns and Communications, said:
'We welcome this commitment to review punitive unarranged overdraft fees, which our research has found can be more expensive than some payday loans. It's also good to see the FCA moving swiftly to research and test some of the CMA's other banking remedies that could bring real benefit to consumers'
This is a pleasing step forward for this campaign - so thank you for supporting us to make change happen.
We’ll be keeping pressure on the FCA to make sure these fees are tackled once and for all.
After a near two-year-long review into the banking sector, the Competition and Markets Authority (CMA) has today announced its proposals to shake up the banking sector.
The CMA concluded that the major banks do not need to compete for customers, and with six in ten consumers having remained with the same bank for more than a decade, the main focus from the regulator has been to encourage bank switching.
A new open banking standard is the main technological solution that the CMA is pushing from today’s package. This will allow new services that are tailored to a customer's individual needs - for example using a mobile phone app to manage accounts held with a different provider, and compare better deals based on their banking usage.
The regulator believes that this will encourage more people to switch, and is requiring banks to deliver it by 2018, however concerns have been expressed about potential security issues.
On unarranged overdraft charges, the regulator has proposed that banks should alert customers whenever they are about to run into their overdraft and give them 'grace periods' to help them avoid charges, but it has not gone as far as to impose a controlled cap on charges, despite our research revealing that some overdrafts can cost as much as a payday loan.
Our Director of Policy and Campaigns, Alex Neill, said:
‘The steps outlined today, to provide customers with better information and an improved switching experience, are welcome. However it is questionable whether these measures will be enough, not only to increase competition but also to ensure banks deliver a better service for their customers.
‘It is disappointing that the monthly charge cap is not actually a cap and banks will be allowed to continue to charge exorbitant fees for so called unauthorised overdrafts, rather than protect those customers that have been identified as among the most vulnerable.’
With over 50,000 supporters backing our call for Better Banks, some of today’s proposals to shake up banking will be welcome news. However, it’s clear that more needs to be done to deliver much needed improvements in banking for all consumers.
We expect the Financial Conduct Authority to now press ahead and test these proposed remedies. But with unarranged overdraft charges at such crippling high rates we’re calling for the regulator to review overdraft charges and crackdown on these punitive fees.
Back our call for genuine better banking by signing our petition today.
New Which? research finds that charges applied to unarranged overdrafts can cost more than those applied to payday loans.
When we compared the cost of borrowing £100 over 28 days we found some high street banks were charging as much as £90, fees which can be up to four times higher than the maximum allowed charge of £22.40 on a payday loan.
Back in January 2015, the Financial Conduct Authority introduced a cap on high cost short-term credit to limit excessive fees charged by payday loan companies. However, our research has revealed that overdraft charges can be much more costly.
Our Director of Policy and Campaigns, Alex Neill, said:
‘People with a shortfall in their finances can face much higher charges from some of the big high street banks than they would from payday loan companies.
‘The regulator has shown it’s prepared to take tough action to stamp out unscrupulous practices in the payday loans market, and must now tackle punitive unarranged overdraft charges that cause significant harm to some of the most vulnerable customers.’
Following its review of retail banking in the UK, the Competition and Markets Authority (CMA) has published its provisional remedies to tackle overdraft charges. The remedies include a requirement for banks to have a monthly maximum charge for unarranged overdraft usage.
However, we’re not convinced that this will make much of a difference. Banks typically already put caps on charges and the CMA’s remedies do not address the overall level of fees.
Alongside our near 50,000 supporters who’ve backed our campaign for Better Banks, we’re calling for unarranged overdraft charges to be set at the same level as arranged overdraft charges.
We’re also calling on the FCA to review overdraft charges in the context of other forms of credit and crackdown on punitive fees.
Join our call for a crackdown on unfair overdraft charges by signing our petition today.
After an 18 month long investigation, the Competition and Markets Authority (CMA) today announced its plans to improve the UK’s £16bn current account market. But falling short of the mark, the CMA’s inquiry has achieved little more than to propose basic information measures.
Time and time again it’s been proven that competition in the banking sector isn’t working for consumers. It’s a sector in urgent need of a shake up.
The regulator believes today’s proposals could benefit bank customers by around £1bn over the next five years.
The CMA’s proposals to improve the banking market include:
- Plans to improve overdraft arrangements, with alerts to warn people about to slip into overdrafts and proposals to require banks to disclose the maximum unarranged overdraft fees they charge per month
- New online comparison tools and more prompts to encourage people to switch
- Plans to improve the current account switching switching service
Our Director of Policy and Campaigns, Alex Neill, said:
‘After 18 months this inquiry achieved little more than to propose basic information measures that the big banks should have introduced years ago. Steps to stimulate switching are welcome but the chance to deliver better banking for all consumers has been missed.
The responsibility will now ultimately lie with the Financial Conduct Authority to ensure that reforms deliver better banking services for everyone.
Alex Neill added:
‘They must also go further than better information to tackle the unfair, punitive charges faced by unauthorised overdraft users, some of whom are hit with fees far in excess of payday loans.
‘Only when the regulator addresses these unfair charges, and holds the banks to account for poor customer service, will we see the shake up in banking that's so desperately needed.’
Earlier this year we launched our campaign for Better Banks. We’re calling on the regulators, government and banks deliver better everyday banking. If you agree too then please sign our petition.
Despite our calls for banks to improve their standards of service, for a second year in a row we’ve found that their staff’s knowledge is extremely poor.
Posing as customers, we visited six branches and made six phone calls to 12 Isa providers, and asked them six straightforward questions about Isas and the savings reforms. Over half of the providers we tested got fewer than half of the questions correct.
Eight in ten staff couldn’t even tell us what the 2016/2017 Isa limit is (it’s £15,240 in case you wondered). One bank even suggested we use the internet to find the answers to our questions!
Our executive director Richard Lloyd said:
‘Bank staff are letting customers down with shockingly poor knowledge on how Isas work. There’s really no excuse for this, especially when it could be leaving people out of pocket.
‘Disappointingly we’ve seen very little improvement on last year’s scores, which shows banks still need to do much more to up their game to ensure they have the right information and systems in place that consumers can rely on.’
Our campaign is calling on the Government, regulator and banks to deliver better everyday banking. We want the knowledge and expertise of staff to be recognised as a key measurement of banks’ customer service, which would help you choose the right bank for you. This undercover investigation clearly demonstrates the importance of this.
If you back our calls for change in the banking industry, them please join more than 40,000 others in signing our petition.
The Competition and Markets Authority (CMA) has delayed announcing findings from its investigation into the banking industry, originally started back in July 2014.
The CMA will now report back in August 2016, taking the duration of its probe well beyond the two year mark. The delay is due to the CMA wanting to ‘properly consider’ responses to suggested measures that will soften the impact of overdraft charges.
The CMA has, however, listened to our arguments on overdrafts and agrees that unauthorised overdraft charges need to be tackled. The remedies put forward include prompts and alerts for those approaching their overdraft, and grace periods to allow customers to avoid unarranged overdraft charges.
Still, the regulator hasn’t gone as far as we would have liked. It is not yet looking at requiring banks to charge the same fees for both arranged and unarranged overdrafts, for example.
Our executive director Richard Lloyd said:
‘This inquiry is now looking like a lost opportunity to deliver better banking for consumers. We are disappointed that the CMA appears unwilling to take action to control unfair, punitive charges faced by unauthorised overdraft users. More information and prompts are simply not enough.’
The CMA needs to go beyond fixing the basics and come up with new solutions that will force banks to sit up and take action.
Richard Lloyd added:
‘The regulator should use this further extension of their inquiry to bring forward stronger solutions to tackle unfair charges and ensure banks are held to account for how they treat their customers.’
If you want to see the CMA shake up the banking sector with reforms that will genuinely deliver better banking services for everyone, then please sign our petition.
Two of the big banks have come out in support of our Better Banks campaign, which calls on the industry to deliver better everyday banking for their customers.
Les Matheson, CEO of Personal and Business Banking at RBS and NatWest, said:
'We agree that Britain needs better banks and that is why over the last few years we've been challenging the industry to help our customers out, not catch them out and we're proud of how we're making banking simpler and fairer for our customers.
'Our new Reward current accounts are market-leading and the overwhelming feedback we've had from our customers is that they give them help where it matters most by rewarding them 3% back on a range of household bills. We've scrapped unfair teaser rates, we offer our best deals to both new and existing customers and our staff are no longer incentivised to sell, meaning they can fully focus on the needs of our customers.
'We offer innovative ways to bank, such as Apple Pay and an award-winning app which allow customers to buy things using their phone and get cash from an ATM using their watch. All of which resulted in us being voted No. 1 for NPS for mobile banking. We've also seen the number of complaints we receive reduce by 14% for NatWest, and 11% for RBS.
RBS came bottom in our latest banking customer satisfaction survey, with Natwest also in the bottom ten. In response to this, Les Matheson said:
'Whilst we are disappointed in these results, we are determined to do more and we are working with Which? to support their campaign, including raising awareness and education of products - not just for our customers, but across the banking industry.'
Nationwide has also come out in support of our campaign to improve levels of customer service in banking.
Terry Kaye, Divisional Director for Customer Experience at Nationwide Building Society, said:
'As a mutual, Nationwide is owned by and run for the benefit of its members meaning they are at the heart of what we do. The Society already has the highest customer satisfaction scores amongst its banking peers, but we aren’t complacent and are always striving to further improve the level of service offered to our customers.
'Most recently we have launched an initiative called Customer First, which further empowers our staff to offer the highest level of service possible. Customer First is about ensuring we do the right thing for our customers right across the organisation, whether that be in their dealings with front line staff or decisions being made within the business. Our view is that if our staff feel empowered, they will want to do the best they can for our customers.'
Today we launch our campaign for better banks, calling for coordinated action from the regulators, government and the banking industry.
Our latest banking customer surveys of more than 20,000 people have yet again found that the big banks are struggling to match the satisfaction levels of their smaller rivals.
Royal Bank of Scotland has come bottom of our table, with Barclays and NatWest also in the bottom 10. And then we looked specifically at ‘customer service’ on current accounts - less than half of the providers scored more than three out of five stars.
Some banks have proven they can get it right, with First Direct and Metro Bank performing well in our surveys. However, a lack of competition means this isn’t driving up standards across the whole industry.
We’re concerned that the Competition and Markets Authority's current proposals to reform the current account market are too focused on getting people to switch. The regulator should also focus on mechanisms that will ensure banks are held to account for how they treat their customers and to put customers in control of their accounts.
Our executive director Richard Lloyd said at the launch of our campaign:
‘It’s high time the industry put its customers first and the competition inquiry needs to ensure that banks are held to account for the way they treat their customers.
‘The big players in this market need to get on the front-foot and improve services for their customers, instead of waiting to be forced into action.’
If you agree that we all deserve better from our banks, then please sign our petition and get your friends and family to do the same.
Last year, the Competition and Markets Authority (CMA) agreed that the market wasn’t working well enough for consumers, and opened a major investigation. Today, we’re calling on the CMA to make sure it goes beyond fixing the basics and comes up with new solutions that will force banks to sit up and take action.
We want to see reforms that will deliver genuinely better banking services for everyone. But what does this actually mean?
Well, what if the Competition and Markets Authority considered increasing compensation levels for people who experience terrible customer service, or naming and shaming the worst providers? Or how about banks being required to proactively help customers who regularly slip into their unauthorised overdraft, rather than just hit them with high charges?
It’s clear that the CMA has a big job on its hands, but this is the perfect opportunity to propose remedies that would finally shake up this sector and make banks respond better to the needs of their customers.
Which? campaigns to make people's lives simpler and fairer. Get involved in our latest campaigns and find out how to take action. Let's make change happen.