StepChange Debt Charity response to the Competition and Markets Authority (CMA) Retail banking market investigation – Provisional decision on remedies
May 17 2016
In response to the Competition and Markets Authority (CMA) Retail banking market investigation – Provisional decision on remedies, Mike O’Connor, Chief Executive of StepChange Debt Charity, said:
“There are 2.6 million people in the UK in severe problem debt and the numbers coming to us for help are still rising. Three quarters of our clients have already used overdrafts just to try and keep up with their essential costs. Whilst the CMA sets out some remedies that are welcome and necessary, including a cap on unauthorised overdrafts and alerting people as they enter them, we remain unconvinced that these measures will go far enough.
“If there is to be a cap on unauthorised overdraft charges, it needs to be set with reference to an independent benchmark to effect any real change and not by the banks themselves. If it is not, there will be no pressure on the level chosen, no impact on charges and nothing to encourage or enable overdraft users to switch banks.
“The remedies don’t do enough for the millions of overdraft users who are in entrenched financial difficulty. Alerting someone to the fact they are in an unauthorised overdraft will have no effect if they are unable to pay in enough money to escape it.
“Banks need to be actively identifying where people are struggling and provide effective forbearance and a route for them to begin to pay down their overdrafts in an affordable way. An extended breathing space guarantee would protect people from interest, charges and enforcement while they take debt advice and a comprehensive solution to their debt problems. Banks also need to proactively offer basic bank accounts to people who need them so they can separate their debt problem from essential day-to-day banking.
“People struggling with the incredible pressure of problem debt have very few options financially and the ensuing stress and health problems mean they are not well-placed to shop around for the better deals that will benefit them. We call on the CMA to strengthen their overdraft remedies in the final package, and on the FCA to ensure that they benefit all consumers, including those who are vulnerable and struggle for fair access to banking.”