UK banks face rules to cap overdraft charges

Given a second chance to get tough on banks, the UK antitrust regulator outlined a cap on fees on customers who spend more than they have in their current accounts, a proposal criticised as too little, too late by consumer groups.

The Competition and Markets Authority recommended a cap on overdraft charges and a grace period for customers to avoid charges in its second report on UK retail banking in seven months.

In 2014, UK banks received £1.2bn (€1.52bn) in revenue from the fees.

The recommendation is an attempt to build on reforms suggested by the CMA in October, when after stopping short of breaking up the banks or ending free current accounts, lawmakers lambasted the regulator for allowing lenders to “pull the wool over their eyes.”

Yesterday’s recommendation falls short once again, consumer groups and smaller banks said.

“After 18 months, this inquiry achieved little more than to propose basic information measures that the big banks should have introduced years ago,” said Alex Neill, director of policy and campaigns at the consumer group Which?.

“The chance to deliver better banking for all consumers has been missed.”

In October the CMA published a package of measures aimed at giving customers more information.

The proposals included the creation of a price-comparison website for small businesses and a requirement for banks to prompt customers to review their services at certain “trigger points,” such as a closing a local branch or a change in terms and conditions.

Those findings prompted angry responses from lawmakers before the regulator decided to extend the probe.

At a hearing in November, lawmakers criticised Alasdair Smith, the chair of the banking investigation, for failing to “challenge these banks to come up with a justification for their costs.”

“The CMA has missed a golden opportunity and is on its way to short-changing millions of Brits by failing to go far enough in its measures to break the stranglehold of the ‘Big Five,’” said Paul Pester, chief executive of TSB Banking Group.

“On the whole this report raises more questions than answers,” he said.

It is the second market investigation carried out by the CMA since it was spun out of the Office of Fair Trading in April 2014.

Overdraft users would save on average £140 (€178), while “heavy” overdraft users would save £260 if they switched accounts to avoid the fees, the CMA said.

The remedy “doesn’t represent a radical departure” from plans the banks already had in place, said Ian Gordon, head of banks research at Investec.

An index of shares of nine banks that includes Lloyds, Barclays and Royal Bank of Scotland, climbed 1.7% at one stage in London yesterday.


Lifestyle

This week's food news with Joe McNammee.The Menu: Quick nibbles; International Women's Day; The People's Choice

With spring around the corner, it’s the perfect time to treat your home to a detox. Gabrielle Fagan taps up the Topology design gurus for tips.How to make your home calmer and less cluttered in 7 simple steps

From Bermuda shorts to romantic white dresses, Prudence Wade looks at the styles you’ll want to wear this season.7 of the biggest spring fashion trends fresh off the catwalk

If your car has been affected by the weather, read on for tips on what to do next.Dude my car is flooded-what should I do?

More From The Irish Examiner