Britain's competition watchdog yesterday said it would consider regulating the market in personal bank accounts if banks do not make their charges and interest rates clearer.
The Office of Fair Trading called for a shake-up of the £8bn market for current accounts, saying they were complex and lacked transparency.
The watchdog's report revealed that some 1.4 million people each paid over £500 in charges in 2006. Many were low-income customers paying fees as a result of having insufficient funds.
On average, banks made as much as £152 per current account but the OFT said some customers end up paying much more due to "opaque" charging information.
It said a "significant" number of customers do not know how much they pay in bank charges, either before or after they are incurred. And the complexity of current accounts makes it "extremely difficult" for customers to compare their account with others.
This, combined with a lack of attractive offers from banks, meant there was little incentive to switch providers, even though some are paying far more for their accounts than others.
The OFT said it would spend the coming months working with banks and consumer groups to encourage more transparency, either through voluntary change or, if necessary, greater regulatory intervention or a referral to the Competition Commission.
"This market is not serving consumers well," said OFT chief executive John Fingleton. "Customers lack the information they need to choose the best deal and this in turn weakens the banks' incentives to compete."
Mr Fingleton said he hoped banks would act to remedy the situation. "If they don't, it's going to be very difficult to avoid regulation," he warned.
The findings follow a survey by the Scottish Consumer Council showing consumers were far less likely to switch bank account providers than any other service. Just 6% of Scots switched current accounts in Scotland in the survey, dramatically fewer than the 29% who moved home insurance provider and 27% who moved mortgages.
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