A new Competition Commission report has found that lack of clarity on charges and unduly complex charging structures, combined with a reluctance among customers to switch providers, are restricting competition in Northern Ireland's personal current accounts market.
These features make it likely that customers will incur higher charges and receive lower levels of credit interest than they might expect in a more competitive market, the Competition Commission (CC) said.
This is the conclusion of the provisional findings summary report published by the CC as part of its investigation into the market for personal current account (PCA) banking services in Northern Ireland. The main providers of these services in the region are Northern Bank, Ulster Bank, First Trust Bank and the Bank of Ireland.
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, noted the Inquiry Group chairman Christopher Clarke. 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.
Along with a perception that switching is difficult, time consuming and risky, this means that most customers can see little benefit in changing providers, he continued. 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.
The CC report also called for the shortcomings in competition to be remedied by making sure every bank customer is able to make an informed choice about which bank account to use, and to be able to see in advance what they will be charged for.
Other provisional findings include that there is a general lack of customer interest in PCAs and customers tend to view PCAs as ‘all the same,’ customer perception is that switching PCAs is much more difficult and risky than it is in practice, and that a customer’s decision to switch is more often prompted by dissatisfaction with their existing bank than the recognition of a better offer elsewhere.
The report also found the banks, particularly the clearing banks, describe their charges using terminology that is unclear and, in many cases, inconsistent between them. This is particularly true of unauthorized overdraft charges and, to some extent, ancillary charges.
In addition, there is a relative lack of competition, particularly among the clearing banks, on several non-price factors such as branch opening hours and the introduction of full-function internet banking, the CC said.
In order to help remedy the situation, the CC proposes introducing requirements for banks to introduce measures such as using easy-to-understand terminology and descriptions of PCA services, providing easy-to-understand explanations of the levels of charges and interest rates and how and when they are applied, and providing on each customer statement information on the bank’s charges and interest rates and their application.
Other proposals include requiring banks to give advance notice of charges to customers before they are debited by the bank, and to provide personal and/or typical indicative quotes, which would allow customers to see the level of charges they could expect from alternative providers based on their existing PCA record.
The CC said that the final report will be published shortly.