Personal current accounts in the UK

16 July 2008

The OFT is seeking comments from stakeholders on the high level concerns identified in its market study into personal current accounts in the UK.

We have found evidence of competition in the PCA market but we are concerned that certain features of the market are not working well for consumers.

The positive aspects include:

• high levels of customer satisfaction
• customers receive many day-to-day services without incurring fees
• internet and telephone banking makes it easier for customers to manage their account, and
• there are a number of providers in the market and evidence of modest competitive pressure on the four established banks by challengers.

The significant areas of concern are:

• low levels of transparency on fees that make up a high proportion of the payment that consumers make for their current account services, both in terms of their amount, frequency and the manner in which they are levied
• the complexity in the way that these charges are implemented that makes it hard for consumers to predict when they will be incurred
• a lack of simple mechanisms for consumers to control whether they use services for which they are charged
• a significant proportion of consumers consistently incur charges and appear to underestimate both their level and frequency, and
• a general perception, not unfounded, among customers that switching is both complex and risky, contributing to low levels of switching between banks and an inefficient allocation of the risks from switching.

Download Personal current accounts market study - a consultation paper (137 kb)
Download Personal current accounts in the UK - an OFT market study (pdf 1.2 mb)
See the market study page

Issues on which views are sought

The issues raised during the course of this market study can be grouped under three broad headings:

• low levels of transparency
• complexity over the charging structure making it hard for consumers to predict and control the costs they incur, and
• low levels of switching.

We would also like to explore potential measures to address these issues.

The OFT also welcomes comments on our findings regarding the ways in which the market has become distorted and the implications that this has for a well functioning market.

Responding to this consultation

We welcome comments on the market study report from all sources, but in particular we would welcome views from the banking and retail finance industry, consumer groups and other interested stakeholders. Consultees responding to this consultation are asked to supply a brief summary of the interests or organisations they represent, where appropriate.

Any suggested changes or comments on the documents should be submitted in writing (by email or alternatively by letter, as indicated below).

All responses and comments should be sent to:

Retail Banking Team
Room 1E
Office of Fair Trading
Fleetbank House
2-6 Salisbury Square
London
EC4Y 8JX
Email: Retailbanking.study@oft.gsi.gov.uk

Closing date for comments : 31 October 2008 

This consultation follows the criteria set out in the Cabinet Office's Code of Practice on Consultation.

Next steps

We will collate responses to the consultation and publish a formal summary of these. Depending on the outcome of the consultation we hope to publish a further or final report early in 2009.

Our aim is for a final report containing recommendations that the banking industry, in consultation with government and other relevant stakeholders, will take forwards. However we will also consider other routes to implement remedies should that not happen.

There are several routes we will consider and would welcome feedback on:

• changes to the Banking Code
• recommendations to government or regulatory bodies, and
• a market reference to the Competition Commission.

Separately, we will also be considering whether failure to adopt any particular future recommendations could lead to enforcement under the UTCCRs or the Consumer Protection from Unfair Trading Regulations 2008. Naturally, we would give the businesses the opportunity to remedy any breaches of the law we identified before taking enforcement action.

Data use statement for responses

Please note that we may choose to refer to comments received in response to this consultation in future publications. In deciding whether to do so, we will have regard to the need for excluding from publication, as far as that is practicable, any information relating to the private affairs of an individual or any commercial information relating to a business which, if published, would or might, in our opinion, significantly harm the individual's interests, or, as the case may be, the legitimate business interests of that business ('confidential information'). If you consider that your response contains such information, that information should be marked 'confidential information' and an explanation given as to why you consider it is confidential. All information received is subject to Part 9 of the Enterprise Act 2002.

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