CC finalises remedies to impose on Northern Ireland personal current accounts

The Competition Commission (CC) published on 15 May 2007 its final report and remedies relating to the Northern Ireland personal current accounts (PCA) sector.

The CC found that competition was limited due to the complicated nature of banks’ charges, the banks’ failure to explain these charges and customers’ reluctance to switch to a different bank account provider. It has now published details of the remedies it is to impose on the sector. These will come into force from April 2008.

The remedies include requirements for banks serving PCA customers in Northern Ireland to:

• describe their PCAs in plain English;
• clearly explain the level of charges and interest rates, together with how and when they are applied. This information must be provided when a customer is choosing a PCA, opening a PCA as well as on statements and when customers are pre-notified of charges and interest payments;
• provide more information on bank statements including details of charges and interest rates;
• provide customers with an annual summary of charges incurred and interest paid and received;
• give customers 14 days notice before charges and debit interest are deducted from their accounts;
• remind customers annually of their right to switch or close their account;
• improve the switching process, including offering a charge-free and interest-free overdraft facility to new customers for at least three months. Alternatively, banks must guarantee to refund any costs arising from failures in the switching process regardless of whether the costs were the result of an error by the new bank.

The better and clearer information remedies must be in place by April 2008 and the remainder must be implemented by October 2008 at the latest.

The Office of Fair Trading (OFT) is currently carrying out a market study into personal current accounts in the UK (see our earlier law-now). The OFT shares the Northern Ireland concerns regarding lack of switching and low levels of price transparency. The OFT believes that information remedies may be appropriate in the UK PCA market study. These remedies are likely to build on those imposed in the Northern Ireland sector, so the CC’s Northern Ireland remedies may act as an early warning for the UK PCA sector.

For the CC’s announcement on the Northern Ireland remedies, please click here.