Complex bank charges criticised

Banks in Northern Ireland have been criticised for their "unduly complex" charges levied on personal current account holders, in a report from the Competition Commission.

However, account holders were also criticised for not "shopping around" to find the best rates and exploit what competition is present in local banking services.

In its provisional report the Competition Commission concluded: "Lack of clarity on charges and unduly complex charging structures and their application, combined with a reluctance among customers to switch providers, are restricting competition in the market for personal current accounts in Northern Ireland.

"These features make it likely that customers incur higher charges and receive lower levels of credit interest than they might expect in a more competitive market."

Commenting on the investigation into the market for personal current account (PCA) banking services in Northern Ireland Inquiry Group Chairman, Christopher Clarke, said: "Despite a number of significant recent changes in this market, competition in the provision of personal current accounts in Northern Ireland is still not working for the benefit of customers. It’s difficult for customers to make comparisons between competing providers due to the failure of the banks to explain sufficiently or fully their unduly complex charging structures and practices. It took us many months to understand what the charges are and how they are applied.

"Along with a perception that switching is difficult, time consuming and risky, this means that most customers can see little benefit in changing providers. Without this competitive pressure from customers, banks are likely to levy higher charges and pay lower rates of interest than might be expected in a more competitive market."

He said that during the course of the investigation, three of the four clearing banks in Northern Ireland have introduced, or announced that they plan to introduce, ‘fee-free’ banking with no transaction or maintenance charges when the customer is in credit or authorised overdraft.

However, the report noted: "Despite evidence of some prices moving in parallel in the past, we did not find that the conditions for tacit coordination were met. Nor did we find any competition concerns at a rural, urban or local level and our focus has been on issues across the whole Northern Ireland market."

The Commission said: "We are considering remedying the shortcomings in competition by enabling every bank customer to make an informed choice on what bank account is best for them and to see clearly, and in advance, what they are being charged and for what."

The inquiry was initiated after a complaint from the Consumer Council and counsumer group Which.

The summary of the Commission's provisional findings report is available at www.competition-commission.org.uk along with a notice of possible remedies.

The full report is expected to be published shortly.

(SP/CD)