Personal current accounts in the UK

Launched: April 2007

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Purpose of the study

To provide the context for the OFT's investigation into the fairness of the
level and application of unauthorised overdraft charges.

To take a broad, strategic, view of the market, looking in particular at:

• Price transparency - do consumers understand what they are paying for their PCA? Can they predict the overall actual cost of their account?
  
• Switching - do consumers have confidence in the switching process?

Alongside the market study, the OFT pursued a separate investigation into the fairness of PCA unarranged overdraft charging terms under the Unfair Terms in Consumer Contract Regulations 1999 (UTCCRs). This followed a significant number of complaints and media coverage about the level and incidence of unarranged overdraft charges in 2006. In December 2009, the OFT decided not to continue its investigation into the fairness of banks' unarranged overdraft charging terms under the Unfair Terms in Consumer Contracts Regulations 1999 (UTCCRs) following a Supreme Court ruling that the OFT cannot fully assess the terms. This decision followed extensive consideration of issues and discussions with stakeholders.

For more information please see Personal current accounts: UTCCRs investigation and test case.

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Findings

The OFT July 2008 report found a number of concerns which we believe need addressing:

1. low levels of transparency over charges and costs, coupled with a high proportion of banks' total revenues made on charges and costs

2. the complexity of the charges makes it harder for consumers to control the costs they incur (some pay significant amounts, 1.4 million consumers paid over £500 in charges)

3. a significant group of consumers underestimate the level and frequency of banks' charges, and

4. a general perception among consumers, not completely unfounded, that switching is complex and risky, contributing to low levels of switching between banks.

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Market study details and reports

Download the OFT1005exec: Executive summary (pdf 146kb). July 2008

Download Personal current accounts in the UK - an OFT market study (pdf 1.2Mb) 16 July 2008

See press release Personal current account market not working well for consumers, says OFT 16 July 2008

Download the annexes of the 2008 market study report:

Annexe A Legal and regulatory framework (pdf 187kb) July 2008

Annexe B Summary report of review of information banks provide to consumers and of price comparison sites (pdf 101kb) 16 July 2008

Annexe C Free-if-in-credit personal current accounts (pdf 250kb) 16 July 2008

Annexe D Personal current account consumer research (pdf 589kb) 16 July 2008

Annexe E Psychology of personal current accounts (pdf 170kb) 16 July 2008

Annexe F Public policy context 'Financial inclusion' (pdf 87kb) 16 July 2008

Download OFT1005con Personal current accounts market study - a consultation paper (pdf 137kb) 16 July 2008

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Action following market study

In October 2009 the OFT announced that banks had agreed to make PCA costs more transparent and the switching process more reliable and trusted. Despite this, the OFT believes fundamental changes are still required for the market to work in the best interests of consumers. Banks earn around a third of their PCA revenue from unarranged overdraft charges that are difficult to understand, not transparent and not subject to effective consumer control.

For more information please see:

Download OFT1123 Personal Current Accounts in the UK - a follow up report (pdf 1.75Mb)

See press release Banks agree to make improvements to personal current account market in the UK 7 October 2009

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Background information

See press release OFT launches market study into personal current accounts 26 April 2007

Download  OFT918 Reasons for market study 'Personal current accounts in the UK' (pdf 131kb) April 2007

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Further information

For consumer advice, information on specific consumer rights and to make a consumer complaint against a trader please contact Consumer Direct on 08454 04 05 06 or visit the Consumer Direct website. Further information about making a complaint about bank charges can be found on the FSA's website.

For all general enquiries and guidance on the OFT's personal current account work, please contact the OFT Enquiries and Reporting Centre on 08457 22 44 99 or email enquiries@oft.gsi.gov.uk. Please be aware that OFT cannot provide advice or assistance to individual consumers or traders.

Back to: Completed market studies