Northern Irish personal current account market – CC consults on competition remedies

On 12 October 2006 the Competition Commission group investigating the personal current account market in Northern Ireland published for consultation details of the measures it may impose on the sector.

The CC has found that competition is not working for Northern Ireland personal banking customers. It believes that it is necessary to impose a package of behavioural remedies to address the identified competition problems. The CC’s consultation on these remedies is open until 17 November 2006. For those active in the sector or considering entering the sector, it is vital to know what the CC is proposing and to make your comments to the CC as appropriate.

The CC’s possible remedies focus on provision of clear information and also on encouraging switching. This is because the CC found that there is a perception among customers that switching is difficult, time consuming and risky, as well as finding a failure by the relevant banks to explain sufficiently or fully their charging structures and practices which it characterises as “unduly complex”.

As regards clear information, the possible remedies require banks active in the provision of personal current account services in Northern Ireland to:

• use easy to understand terminology and descriptions of personal current account services;
• explain in a way that is easy to understand the levels of charges and interest rates, as well as how and when they are applied;
• print on customer statements information on the bank’s charges and interest rates and their application;
• give a detailed breakdown on each statement of the charges and interest rates incurred by the customer; and
• give customers advance notice of charges before they are debited to the customer’s account.

As regards switching, the CC’s possible remedies require banks active in the provision of personal current account services in Northern Ireland to:

• provide personal and/or typical indicative quotes of the level of charges customers could expect to pay to alternative providers based on the customer’s existing current account record;
• remind customers regularly of their right to switch their bank account to another provider;
• publish switching statistics; and
• make changes to the switching process, possibly by introducing portable personal current account numbers.

Although three of the four Northern Ireland clearing banks have introduced or plan to introduce fee free banking, the CC appears to be unconvinced that this will significantly improve the situation. The CC noted that these new accounts offer no transaction or maintenance charges when the customer in credit or authorised overdraft but in many cases this means charges have been increased on unauthorised overdrafts.

Please click here for the text of the CC’s possible remedies and click here for details of how to respond to the consultation.