Weak banking reforms do nothing to boost consumer empowerment

They had hoped for fundamental reforms, a pivotal moment in the banking sector that would level the playing field for millions of bank and building society customers – especially the most vulnerable.

What campaigners got, the culmination of at least 16 years of appeals, investigations and recommendations, was ‘softly softly’.

When the Competitions and Markets Authority (CMA) revealed its final plans to remedy long-standing, deeply entrenched flaws in the way the banking sector treats its customers this week, what we got was a washed out series of plans that attempted to replace tighter rules with greater consumer access to information.

The criticisms levelled at the industry, particularly around high fees for unauthorised or unarranged use of overdrafts, were met with a series of new rules that include a new smartphone app that will front a new Open Banking programme designed to show customers which banks offer the best account for their circumstances. This will require customers to allow their bank to share their personal information with a third party.

Elsewhere there will be maximum monthly fees for unarranged borrowing that banks will set themselves, banking providers will have to inform customers if they have exceeded their borrowing limit – something that most providers already do anyway – and new measures to encourage bank account switching, which has been tried before in various guises with uninspiring results.

Defending the decision to steer clear of heavier regulation for fear of reducing the availability of unarranged overdrafts, Alasdair Smith, chair of the CMA’s retail banking investigation claimed the measures “will shake up retail banking for years to come, and ensure that both personal customers and small businesses get a better deal from their banks.”

But few agree. Consumer group Which? was “disappointed that the monthly charge cap is not actually a cap and banks will be allowed to continue to charge exorbitant fees for so-called unauthorised overdrafts, rather than protect… the most vulnerable.”

The chairman of the Treasury Select Committee, Andrew Tyrie MP, said the CMA was relying on new technology to do the heavy lifting on competition, despite many customers having neither the tools nor the skills to access it. “Until people are able to find out how much their bank charges them for their current account, millions of customers will be denied genuine choice in retail banking,” he added. And the British Chambers of Commerce warned of the dangers of data sharing.

This seems worryingly like permission to continue with business as usual. Such a half-hearted response fails to curb a culture that still sees customers as cash cows, regardless of the much spouted “treating customers fairly” mantra. But neither does it encourage consumers to think clearly about this entirely commercial industry.

Every time a new scandal breaks over just how much providers make out of their customers, whether it’s the real cost of “free” accounts, the extortionate fees incurred for the smallest slip in overdraft management, even the PPI mis-selling, we never fail to be surprised that, in fact, these businesses are in it for the money.

A murky combination of marketing spin, the ever present “adviser” sales staff, and the weird legacy that holds the local bank manager right up there with society’s other infallibles (doctors, priests, teachers) blinds us, over and over again to the underlying nature of these institutions.

If we can remember their true colours, more than 3 per cent of us might consider switching accounts when customer service is diabolical, those who can, might take sliding over the overdraft limit a little more seriously (it was almost a point of honour during uni) and those who are struggling through little fault of their own might be on the receiving end of a little more empathy.