An investigation by the UK’s competition watchdog into whether bank customers are getting a good deal has been extended.
The Competition and Markets Authority (CMA) launched an in-depth investigation into the £16bn current account and business banking sectors amid concerns that they were not giving consumers the best deal.
When it published its provisional findings in October, it said that banks do not have to work hard enough to compete for customers.
Complex overdraft charges, limited information, and fears over switching were named as issues that meant banks weren’t having to fight to get business.
But despite suggesting some measures to get customers a better deal, the watchdog was accused by some of not going far enough after ignoring calls to break up some of the biggest High Street names.
Its final report was due to be published in May this year, but in a statement the CMA said it was extending the timetable for the probe.
It is now expected to set out a new timetable by early March.
Alasdair Smith, chairman of the investigation, said: “Retail banking affects nearly every business and consumer in the UK, so this investigation and the measures that result from it are of vital importance to the whole economy.
“Our provisional findings identified a number of competition problems in both personal current account and small and medium-sized enterprise banking.”
He admitted that consultation into its original list of “possible remedies” had generated “a lively debate” about how to tackle the problems it had found.
“A number of new suggestions have been made, including proposals aimed at achieving better outcomes for current account customers with overdrafts and the CMA wants to ensure that there is enough time to hear from interested parties and consider the options properly.
“We therefore expect that an extension will be necessary to give us a bit more time for analysis and consultation.
“However, we remain committed to concluding this investigation as quickly and efficiently as possible.”
When it published its provisional findings, the CMA said there were a number of competition problems in both the personal current account market, and for small and medium-sized enterprise banking.
It found that more than half (57%) of consumers had been with their current account provider for more than 10 years, and 37% for more than 20 years.
“Customers with current accounts are faced with complex overdraft charges and limited information on product and service quality, which, along with limited effective comparison tools, makes it very difficult for customers to know what they are paying and to compare banks and products,” it said.
It also found that despite efforts to make switching current accounts easier, just 3% of customers switched theirs in 2014.
It suggested a list of potential remedies, including requiring banks to prompt customers to review the service they get from their bank at certain ‘trigger points’ like loss of service, closure of their local branch, unarranged overdraft charges or a change in the terms and conditions of their account
But it said structural remedies, like forcing the break-up of banks were provisionally rejected as they were “not likely to be effective in addressing the competition concerns found”.
“The problems in the market are unlikely to be resolved by creating more, smaller banks; it is the underlying issue of lack of switching which has to be addressed,” it said.