CMA banking investigation into competition of current and small business accounts delayed

The Competition and Markets Authority first proposed the probe in July 2014

Difficulties switching current accounts, a lack of smaller competitiors to the "big four" banks and lending to businesses were all areas for concern (Getty)

A long-awaited report into the retail banking industry has been delayed by the Competition and Markets Authority to give it more time to decide what measures it might take.

The three-month delay will push the investigation into its fourth year with a final deadline now set for August. Details of the watchdog’s planned remedies, which had been due last month, will not now be published until May.

The delay angered the consumer group Which?. “This inquiry is now looking like a lost opportunity to deliver better banking for consumers,” warned Which? executive director, Richard Lloyd.

However, the regulator published a number of new possible recommendations.

In the current account market, it had been focusing particularly on unauthorised overdrafts. Yesterday it suggested banks could do more to warn people that they are about to go overdrawn, by sending them a text for example, either when they’re close to going into the red, already overdrawn or when they have had a payment turned down because there’s no money in their account.

But it suggested that its final report could recommend that the costs of going overdrawn could be capped and the time-period customers are given to top up their account before being charged for going overdrawn could be extended.

In a supplemental notice published yesterday, the CMA said: “We are considering measures to increase the constraints on [personal current account] providers’ overdraft offerings. We are seeking to do this by enhancing our switching measures and by developing additional remedies that increase customers’ awareness of and engagement with their overdraft usage.

“We are also considering measures to limit the cumulative effect of unarranged overdraft charges.”

The CMA has strengthened its proposals after publishing its initial thoughts last October that were met with derision from challenger banks which demanded changes that might make it easier for them to win business away from the older, established big five.

Commenting on the new proposals, Richard Neudegg, head of regulation at uSwitch, said: “We want to see solutions that force all banks to up their game on customer service and product innovation.”

He welcomed the focus on achieving better outcomes for overdraft users, “as it is these customers who end up paying the most for current account services”.

He added that the banking industry should be providing clearer information about the true cost of current accounts, as well as ensuring consumers can access better deals.

But Mr Lloyd was more scathing: “We are disappointed that the CMA appears unwilling to take action to control unfair, punitive charges faced by unauthorised overdraft users,” he said. “More information and prompts are simply not enough.”

He said that the regulator should use the further extension of its inquiry to bring forward stronger solutions to tackle unfair charges and ensure banks are held to account for how they treat their customers.

The CMA has asked for responses on its new overdraft proposals from all interested parties by Monday 21 March 2016.