Page last updated at 13:37 GMT, Tuesday, 22 September 2009 14:37 UK

Banking fees 'incomprehensible'

Person using cash machine
Current account fees were not obvious, the report found

Information given to some banks' customers was "incomprehensible" and fees were "opaque", a scathing report on banks has suggested.

An EU-wide price comparison website should be set up for current accounts, the European Commission report said.

Only 9% of EU consumers switched accounts in 2007 and 2008, compared with 25% of car insurance customers.

The report mirrors a UK review which said that current accounts were not working.

"Retail bankers are letting consumers down," said EU consumer commissioner Meglena Kuneva.

"There is widespread evidence that basic consumer principles are being violated with problems from complex pricing to hidden charges and information that is unclear and incomplete.

"Banks need to put their house in order with a culture change in the way they treat customers."


The Commission studied the pricing of accounts offered by 224 banks across the EU. Its findings included:

  • Experts needed more explanation from banks about their fees in 66% of cases. One in 10 banks had no price information at all on their websites
  • Current account charges ranged from 253 euros (£229) in Italy to 27 Euros (£24) in Bulgaria for the average user per year. The UK ranked 17th most expensive out of 27 countries at 103 euros (£93)
  • Consumers in countries with "opaque" price structures - such as Austria, France, Italy and Spain - paid more for their bank accounts.

The findings, as well as the lack of switching among customers, has prompted the Commission to urge member countries to use existing consumer laws to ensure banks are providing clear and complete information on their websites.

The report said it was "almost impossible" for some consumers to know what they were paying and to compare charges on different accounts.

The Commission wants price comparison websites set up across the EU as well as in individual countries that would outline banks' tariffs each year.

"As Europe's citizens continue to feel the effects of the economic crisis, this work has become even more important," said internal market commissioner Charlie McCreevy.


Consumers are charged upfront for their current accounts in some European countries, whereas others - such as the UK - have charges for specific services.

Italy: 253 euros (£229)
Spain: 178 euros (£161)
France: 154 euros (£139)
Austria: 140 euros (£126)
Latvia: 115 euros (£104)
Source: European Commission report

In Spain, where prices are high, arrangements are subject to negotiations on a case-by-case basis between the client and the bank.

The average EU household made an average of 149 transactions from their current account in 2007, the report found, and most still used cheques.

In the UK, householders were much more likely to use their account frequently, especially with direct debits, with an average of 225 transactions in 2007 and twice the number of cash machine withdrawals than in the 15 main EU countries.

Yet, a report by the UK Office of Fair Trading (OFT) in July 2008 found that personal current accounts were "not working well" for consumers. Many people were unaware of their account's interest rate or what they paid in charges.

The complexity of the £8bn industry meant customers were less likely to switch banks. The OFT estimated that the banks earned the equivalent of £152 for each of the 54 million active accounts in the UK in 2006.

The OFT and a number of banks are currently contesting a test case about the fairness of overdraft charges. Meanwhile, they have been in discussions about the clarity of fees and services.

A update to the 2008 report will be published by the OFT before the end of 2009.

Commenting on the European Commission report, Doug Taylor, of the consumers' association Which?, said: "The lack of transparency around financial products has been evident in the UK for a long time.

"Now we are being told British banks are below average for price transparency on current accounts. It is no wonder customers can't compare accounts, and end up staying with the devil they know."

However a spokeswoman for the British Bankers' Association said: "UK banks are already working - and in many cases have completed work - on the key aspects of the report. We are continually working to provide customers with all the facts they need to make informed decisions about their finances.

"Switching bank is easy and the fact most people stay with their bank is testament to general levels of customer satisfaction and neither apathy or difficulty."

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