Banks have certainly been under fire in the last year or more, mainly due to the issue of bank penalty charges.
And now, after a study done by the OFT, they have concluded that current accounts are not working well for us!
Really? Wow; tell us something we didn't know!
Following an investigation by the OFT into £8.3 billion current account industry (in which banks make an estimated £152 per year per active account) it was revealed that a "significant" number of us do not know how much we pay in bank charges, either before or after they are incurred.
It also said that the complexity of current accounts makes it "extremely difficult" for us to compare our account with others. Just 6% of us switched accounts in the past 12 months, making Britain's one of the lowest switching rates in Europe.
The OFT's report comes as we most of us eagerly wait for the results of an appeal over this year's high court test case on bank charges. The OFT and eight banks had gone to court to determine if charges for unauthorised overdrafts could be contested under unfair contract laws. The banks launched an appeal after the judge found the OFT could challenge the fees.
The OFT found that a significant number of us did not know how much we paid in bank charges, even after we have incurred the charges!
Claim back your penalty charges
- Charges hitting the vulnerable
The investigation found that about 4 million of us incurred charges of more than £200 in 2006, of which 1.4 million of us paid more than £500.
The OFT said these charges were hitting "vulnerable" low income earners, particularly because the banks offered no simple mechanisms for consumers to control or opt out of an unauthorised overdraft.
Across the market, it said banks were making £152 a year from every active current account, and that 12.6 million accounts (23% of those in use) had incurred at least one insufficient funds charge in 2006.
- Banks not transparent about revenue
The OFT also said that banks are opaque about how they derive revenue from our current accounts, with 81% of their income coming from bank charges, worth about £2.6 billion a year.
The banks make a further £4.1 billion from interest on overdrafts. The OFT also said that current accounts generate more revenue for banks than savings and credit cards combined, the OFT said.
John Fingleton the Chief Executive of the OFT, commented on their survey:
"Personal current accounts are a vital gateway to effective participation in the economy. But this market is not serving customers well. Customers lack the information they need to choose the best deal, and this in turn weakens the banks' incentives to compete.
"There is much the banks could do to improve how the market works, and we hope this report will encourage them to take steps to do so in the near future."
The consumer group Which? said the report confirmed its position on the current account market with Phil Jones of Which? saying:
"This confirms what we've always argued; that there is no such thing as free banking, most people have no idea how much they pay for their current account, and the market is uncompetitive. It's a catch-22 situation; people aren't switching because there's little difference between the big banks' current accounts and, because people aren't switching, banks have little incentive to compete for customers.
"What's needed is greater transparency, competitive rates and for switching account providers to be made easier."
Banks immediately rejected the accusations (which is not a complete surprise eh?)
The British Bankers' Association (BBA) said the report had only looked at revenue and not considered the cost of running a current account.
Angela Knight, chief executive of the British Bankers' Association, dismissed the OFT's £152 revenue figure as "contrived" and said that if the OFT continued to push for unauthorised charges to be lowered, banks would be forced to recoup their costs by increasing fees for other services.
Speaking on BBC Radio 4, Ms Knight said:
"It is slightly contrived, I thought, that figure, because elsewhere in the report they point out something that we've been saying time and time again, and that is that 80% of individuals don't incur, for example, unarranged overdraft charges or any of those sort of things.
"Yes, you can incur charges if you do things without making arrangements first, but do you really want to pay for ATM use, pay for statements, pay for direct debits in this country? Surely people don't."
Would you agree that current accounts don't work properly for those of us that use them? What changes could be made to improve them?
Why not let us know in the comments below?
Here are some best current accounts available that you should consider switching to:
A&L has had the best current account on the market for a while now, both in interest rate (paying up to 8.50% to its Premier Direct customers) and winning the Moneyfacts current account of the year for 5 years in succession.
Similar to the Premier Direct Account but an online account available to those of you aged 16-20 and paying an interest rate of up to 10.00%
Exclusively for the over 50s, it has a range of benefits including worldwide travel insurance and exclusive health benefits up to age 79 and an interest rate of up to 8.50%