OFT Criticises 'Opaque' Bank Account Terms

Britain's bank accounts are not providing a satisfactory service for customers, an Office of Fair Trading (OFT) investigation has found.

In particular, account providers were criticised by the watchdog for raising much of their revenue "opaquely". Customers were also found to be largely ignorant of how much they were paying their banks in penalty fees for offences such as bouncing cheques and late payments, with three in four also unaware of their bank account's interest rate.

Statistics from the OFT report show that more than 80 percent of banks' annual income from current accounts come either from these penalty charges (£2.6 billion of the total) or from interest payments (£4.1 billion).

As a result, the OFT suggests that banks make these payments and rates much more transparent, in order to make it easier for customers to compare their account to those offered by rival firms. This is supported by the comparatively low rates of customer switching in the UK, with just six per cent having changed account providers over the past year.

John Fingleton, OFT chief executive, said: "Personal current accounts are a vital gateway to effective participation in the economy. But this market is not serving consumers well. Customers lack the information they need to choose the best deal, and this in turn weakens the banks' incentives to compete.

"There is much the banks could do to improve how the market works, and we hope this report will encourage them to take steps to do so in the near future."