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MSE News: OFT to investigate current accounts

edited 30 November -1 at 1:00AM in Budgeting & Bank Accounts
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  • missilemissile Forumite
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    The last investigation was a whitewash and a complete waste of time and money. This one will be no better.

    I would switch to Dave's Bank if I could.
    "A nation's greatness is measured by how it treats its weakest members." ~ Mahatma Gandhi
    Ride hard or stay home :iloveyou:
  • JezzamkJezzamk Forumite
    287 posts
    I understand that it costs the bank to provide a current account. What I do not accept is that they make a loss on running current accounts.

    If the banks were losing money on current accounts they would stop offering them.

    Also, banks are advertising current accounts and some even offer financial incentives to move to them. Why would they pay to win unprofitable business?

    The banks make money on investing the money that is in my account. Although the rate of return on the amount in a typical current account is small the returns to a bank are much higher as they are investing the deposits across all the accounts they hold.

    I accept that if I overdrawn there will be a charge and that interest is payable on overdrafts.

    In addition to investing the deposits the banks want the cross sales from the current accounts such as mortgages, personal loans, insurance, pensions and possibly business accounts.

    However, the banks will make it appear that they are making a loss by showing all the costs asssociated with running an account but only showing the obvious returns.

    The banks usedto charge for current accounts and would love to reintroduce charges, but none of them want to move first as they will lose too much business. However, if they are told the current practise is unfair then they can say they didn't want to charge but were forced to.

    All of this because a minority of people can't manage their financial affairs and expect the majority to subsidise them.

    I do not work for a bank and I believe that there are a lot of unsound/unfair practices within the banking sector but they way that current accounts are run isn't one of them.
  • edited 14 July 2012 at 11:48AM
    opinions4uopinions4u
    19.4K posts
    edited 14 July 2012 at 11:48AM
    The current account market is innovative and competitive.

    Reward, Vantage, 123, free travel insurance products, interest free overdrafts, packaged accounts with different insurances for a fee.

    Loads of choice. Charging structures that are basically voluntary. Incentives to switch provider.

    I'm sure the OFT quango has far less competitive markets that fall under their remit that they could take a peek out.

    I'm sure there are more dubious practices in banking than the provision of current accounts.

    But finding another populist bank bashing approach deflects the attention from our poor politicians.
  • ConsumeristConsumerist Forumite
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    opinions4u wrote: »
    The current account market is innovative and competitive.
    :rotfl:

    I accept that the current account market is innovative. It's a question of who can get away with charging the most before there is a public outcry.

    Halifax, I think, started the greediest approach to overdrafts by abandoning the interest charge on overdrafts which was a fair system because those with large and consistent overdrafts paid the most. Since they got away with it, despite initial complaints from customers, the other banks followed their lead.

    And what was their excuse? They claimed it was easier for their customers to understand. It is now emerging that banks in general are basically dishonest and the sooner the current system is dismantled and reassembled for the benefit of bank customers, the better.

    All this, of course, will take some time because of the taxes they used to generate but, having now exposed banking as a generally corrupt enterprise, we have an opportunity to rebuild it.

    We must, of course, expect the banking lobby on this site to express the view that banks really are whiter than white and have been badly misunderstood. The rest of us know better.
    >:)Warning: In the kingdom of the blind, the one-eyed man is king.
  • Alpine_StarAlpine_Star Forumite
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    opinions4u wrote: »
    The current account market is innovative and competitive.

    The Indepenent Commision on Banking found that:

    ''There are long-standing competition issues in UK retail banking.''

    Doesn't sound particularly competitive to me.
  • aldreddaldredd Forumite
    925 posts
    Jezzamk wrote: »

    All of this because a minority of people can't manage their financial affairs and expect the majority to subsidise them.

    How do you work that one out?
    I think it's been pretty well proven that it does not cost banks to manage accounts frequently going into the red anywhere close to what they charge their customers.

    Believe me, I've been there and it's truly crippling what they would charge in a given month if you have cash flow issues.
    Thankfully I'm financially stable these days, but sympathise with those still dealing with it - and any suggestion this group of customers subsidises well ran accounts is frankly insulting.
  • The Indepenent Commision on Banking found that:

    ''There are long-standing competition issues in UK retail banking.''

    Doesn't sound particularly competitive to me.
    Price up identical iPads at 6 high street retailers.

    Let me know if you find any differences at all.

    Price up current accounts from the five main high street bank brands and Natiowide Building Society. Big pricing differences in credit and overdrawn.
  • ConsumeristConsumerist Forumite
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    opinions4u wrote: »
    Price up current accounts from the five main high street bank brands and Natiowide Building Society. Big pricing differences in credit and overdrawn.
    That suggests to me there is little competition in banking. In a competitive market prices tend to converge.
    >:)Warning: In the kingdom of the blind, the one-eyed man is king.
  • pqrdefpqrdef Forumite
    4.6K posts
    That suggests to me there is little competition in banking. In a competitive market prices tend to converge.
    And then people say it's a cartel and there's no competition.
    "It will take, five, 10, 15 years to get back to where we need to be. But it's no longer the individual banks that are in the wrong, it's the banking industry as a whole." - Steven Cooper, head of personal and business banking at Barclays, talking to Martin Lewis
  • ConsumeristConsumerist Forumite
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    pqrdef wrote: »
    And then people say it's a cartel and there's no competition.
    But a cartel doesn't respond to market conditions, it tries to set them. With competition, the market responds to market conditions so that supply meets demand.
    >:)Warning: In the kingdom of the blind, the one-eyed man is king.
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