City watchdog outlines plans to improve current account competition
The FCA will look at overdraft charges and it will test and implement measures to increase customers’ engagement with them.
It comes after the Competition and Markets Authority (CMA) said banks will be required to send alerts to customers going into unarranged overdrafts, and inform them of a grace period to avoid charges.
After a two-year investigation into the retail banking industry, the CMA proposed banks set a monthly cap on unarranged charges, in the form of a monthly maximum charge (MMC), and the city regulator said it will consider the need for rules in relation to this and will begin to collect data next year.
Banks may also be required to publish better, comparable information to help consumers choose between different lenders as part of the ‘Open Banking’ standard and the FCA said it will set up an expert group to consider what information should be published.
Lastly, the CMA also recommended that the FCA develop and test ‘prompts’ to remind customers to review whether they are getting the best value. The regulator will now research which prompts are most likely to help consumers understand their account usage and how much their account costs and encourage them to consider switching. This research and testing will begin in early 2017.
Beyond current accounts, the FCA said it will also undertake work on high-cost credit.
Andrew Hagger of Moneycomms.co.uk said it’s good the regulator has wasted little time in taking the baton from the CMA and is putting plans in place to change the current account market for the better.
“A revamp of the current account sector is long overdue particularly regarding overdrafts (agreed or otherwise) as the inability to be able to compare costs has baffled customers for far too long and stifled any meaningful impact on the sector from the challenger banks.
“With banks currently charging a mix of debit interest, daily fees, monthly fees and a combination of these, the customer has little chance of knowing if they have the right bank account and for many this is a key reason why they don’t switch, because unless they are confident that they making the right move then the incentive to up sticks just isn’t there.”