EU raps banks for confusing customers

Europe’s banks were condemned today for bamboozling customers with hidden charges, complex price structures and shoddy advice.

The problem is so bad even experts carrying out a survey for the European Commission could not understand the real costs of the accounts in nearly 150 of the 224 banks targeted by Brussels across the EU.

Europe’s Consumer Commissioner Meglena Kuneva called for a culture change in banks and better enforcement by national authorities of consumer rights enforcement in the banking sector.

Commissioner Charlie McCreevy, in charge of the EU single market, added the Commission was ready to “set the ground rules” for the conduct of banks towards their customers if the banks fail to tackle the issue themselves.

The Commission said “opaque” fee structures were inhibiting bank customers from taking up their right to switch banks. Only 9% of EU consumers switched current accounts in the two years 2007-2008, partly because the confusing current account information in many banks make it impossible to compare different offers. That compares with about 25% of car insurance customers who switched companies in the same period.

The EU already has rules – the Unfair Commercial Practices Directive – banning any practices which mislead consumers and distort choice.

That, the Commission said today, includes leaving out information linked to bank accounts or “giving such unintelligible information that the average consumer cannot work out the price”.

A voluntary code of “common principles” designed to ensure easier bank account switching comes into force on November 1, and the Commission warned the banks it would now carefully monitor implementation.

Ms Kuneva said: “Retail bankers are letting consumers down.

“There is widespread evidence that basic consumer principles are being violated with problems from complex pricing to hidden charges and information that is unclear and incomplete.”

Internal Market Commissioner Charlie McCreevy said: “This consumer market monitoring shows the difficulties that consumers face in their dealings with retail financial products and services.

He added: “The Commission is determined to combat those problems.

“That means imposing transparency with understandable and comparable information and setting the ground rules for the conduct of business. As Europe’s citizens continue to feel the effects of the economic crisis, this work has become even more important.”

The report describes the price structures of current accounts as “very opaque making it almost impossible for consumers to know how much they are paying and to compare different offers.”

For 66% of banks surveyed, bank fees were so unclear that experts compiling the report needed additional explanatory contacts with the bank to find the real costs of an account.

Austria, France, Italy and Spain score poorly on transparency and are among the most expensive countries for banking accounts.

And average prices of running current accounts varied hugely across the EU - from as high as €253 in Italy to as low as €27 in Bulgaria. In the Republic of Ireland the average cost of running a bank account is €82.

UK average charges are put at about £95 – seventh highest of the average charges in the 27 EU countries.

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