The Competition & Markets Authority (CMA) has criticised British banks for making it harder for customers to leave, while effectively penalising loyal savers through a series of price raises.
Savers have been particularly under-served by their banks, the CMA found, with long-term customers losing out on a massive £1.1bn per year as a result of low interest rates and account fees.
As part of its response to the super-complaint which was lodged earlier this year by Citizens Advice, the CMA investigation “has uncovered damaging practices by firms, which exploit unsuspecting customers.”
“These include continual year-on-year stealth price rises; costly exit fees; time-consuming and difficult processes to cancel contracts or switch to new providers; and requiring customers to auto-renew or not giving sufficient warning their contract will be rolled over,” said the CMA in a statement.
These hidden penalties and low interest rates add up to a loss of £4bn per year to UK consumers, according to CMA calculations.
The regulator has called for reform in the savings market to protect long-term customers from low rates. The CMA has backed a recent proposal by the Financial Conduct Authority (FCA) to introduce a minimum savings rate.
The CMA investigation also suggested that there should be targeted price caps for the most vulnerable consumers, and greater transparency around the fees charged by banks.
“You don’t have to be a devoted rate chaser to get a better deal,” said Sarah Coles, personal finance analyst at Hargreaves Lansdown.
“The savings market is innovating and the development of marketplace savings services throughout 2018 has made switching incredibly straightforward. There’s no quiet automatic switching into a ropey rate after your competitive rate expires – because you’ll immediately be alerted, so that with a handful of clicks you can move your money somewhere far more rewarding.”
A recent survey commissioned by Hargreaves Lansdown found that half of all savers haven’t switched accounts for at least five years, while 40 per cent of people have never switched their savings account or cash ISA.