The Financial Conduct Authority (FCA) has announced that it will take action to improve competition in the current account market.
This follows a series of recommendations proposed by the Competition and Markets Authority (CMA) as part of its investigation into retail banking.
The action will be in three areas:
Improving transparency for overdraft users: The FCA will research, test and implement measures to increase consumers’ engagement with their overdraft usage and charges.
This also includes consideration for rules in relation to the proposed Monthly Maximum Charge (MMC) and will begin to collect data in 2017 in order to do this.
Promoting innovation: The FCA will welcome the introduction of the Open banking standard and take forward other recommendations from the CMA, which includes acting as an observer on the Open Banking steering group.
Improving service and customer engagement: The FCA will require banking to publish better, comparable information for consumers. In addition, prompts to encourage consumers to consider their banking arrangements will be considered, possibly to encourage switching. Research and testing will begin in 2017.
Beyond current accounts: A look at the competition and conduct implications of the business model links between current accounts and other retail banking products.
Christopher Wollard, executive director of strategy and competition at the FCA, said: “It’s important that competition works well in the retail banking sector. Our work, taking action in response to the CMA’s recommendations, will help to further drive effective competition by helping customers and small businesses to take more control of their finances.
“Our role in regulating retail banking markets goes beyond the remedies the CMA has asked us to take forward, and we will continue to look more broadly at how well these markets work, with a particular focus planned on high-cost credit including overdrafts. We will also be looking at wide retail banking business models.”
Alex Letts, founder of current account competitor U, commented on the move to RBI: “When a 20 day unplanned overdraft of £100 has a ridiculous APR and when you consider the normal people who this is hurting most, any action by the FCA seems welcome and overdue.
“But I could save them some years of debate with a few suggestions. How about stopping the use of the word free when talking about current accounts, as they are only free-if-in-credit, start calling them ‘£0-85 fee accounts’, and publishing APRs on overdrafts. Then people would realise that even a planned overdraft can be more expensive even than a payday loan.”