Watchdog Bashes Greedy Banks

The Competition Commission is set to clean up banking in Northern Ireland. But do its remedies go far enough?

Last year, in Northern Ireland's Banking Scandal and Naughty Banks In Northern Ireland, I alerted Fool readers to the problems and rip-offs suffered by banking customers in Northern Ireland (NI).

Although banking customers in England, Scotland and Wales grumble about high charges, poor service, and an emphasis on putting profits before customers, those in Northern Ireland really are being taken for a ride. Sadly, this issue has attracted little Press coverage in the mainland, perhaps because the population of Northern Ireland accounts for less than 3% of the UK total (just 1.7 million out of over 60 million), or because NI is a fair old way from London.

The big problem in NI is a lack of competition between banks for personal-banking services, particularly current accounts. In effect, the four local banks -- Bank of Ireland (NI), First Trust, Northern Bank and Ulster Bank -- have the market sewn up, which makes for bad news for consumers and businesses.

As many UK-based banks don't offer a full banking service in NI, these four clearing banks have been fleecing their customers for years. Rip-offs in NI include low interest rates on savings and credit balances in current accounts, high interest rates on credit cards, mortgages and personal loans, expensive insurance policies, and so on.

In addition, there is a marked reluctance for NI consumers to switch banks, partly thanks to complex charging structures and a lack of clarity on charges. To be frank, even the best products in NI would be near the foot of the banking tables elsewhere in the UK!

However, this is all set to change, thanks to a package of remedies announced today by the Competition Commission (CC). Although the CC's solutions are provisional, they are highly likely to be adopted when it makes its final decision by 25 May, which should lead to increased competition for personal banking services in NI. Here's what consumers in the 26 districts can look forward to:

1. Easy-to-understand descriptions of banking services. This will include better information on statements, such as details of charges and interest rates.

2. Clear explanations of charges and interest rates, including how and when they are applied. This information should be available when the charges are made as well as when opening an account.

3. At least fourteen days' notice of charges and debit interest before these are deducted.

4. An annual summary of charges and interest payments, plus an annual notice reminding customers of their right to close their account or switch it to another bank.

5. An improved switching process, including a charge-free and interest-free overdraft facility to new customers for at least three months. If this is inappropriate for certain customers, banks must refund any costs incurred from slip-ups in the switching process.

Of course, customers in NI can expect to benefit from the outcomes of other ongoing investigations into banking swindles, such as those into overdraft charges, payment protection insurance, and so on. Nevertheless, many consumers will continue to be at the mercy of NI's 'Gang of Four', largely out of a mistaken sense of loyalty.

My advice to consumers in Northern Ireland is simplicity itself: don't tie yourself to a name or a local branch. By shopping around online, you can overcome any geographical and commercial boundaries -- and find Best Buy banking products to suit your needs. Indeed, thanks to the joys of telephone and Internet banking, you may find yourself needing to visit your local bank branch only once in a blue moon.