OFT critical of current accounts

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A "significant" number of customers do not know how much they pay in bank charges, either before or after they are incurred, the OFT said. And the complexity of current accounts makes it "extremely difficult" for customers to compare their account with others.

OFT chief executive John Fingleton said: "Personal current accounts are a vital gateway to effective participation in the economy. But this market is not serving customers well."

The OFT said UK banks earn £8.3 billion in revenues from personal current accounts, including £2.6 billion in overdraft charges.

Another £4.1 billion is earned from net credit interest income - or interest that account holders should be earning but which is going to banks.

Personal current accounts hold a combined £100 billion, the OFT said.

The study comes in the wake of the OFT's recent High Court victory on the issue of unauthorised bank overdraft charges, which paves the way for a second hearing to decide whether the charges are unfair and what a fair charge should be.

Banks have appealed against the verdict, and the second hearing will be delayed until this is settled.

The OFT said that banks earn an average of £152 per active personal current account, but some customers end up paying much more due to "opaque" charging information.

"The complexity and lack of transparency of personal current accounts makes it extremely difficult for individual customers to compare their bank account with other offers," the watchdog said.