No 103: Competition Policy Story 2 - More about banks

.

THIS one concerns ISAs (Individual Savings Accounts), tax free savings accounts in which every UK adult can invest up to about £10,000 a year.

Those financial insitutions who provide ISAs have just become subject to a "super complaint".

Now you may think you are a big complainer. Or perhaps someone in your family. Or even your Economics teacher. However, none of us qualify to be called a "super complainer".

Super complainers are independent organisations who try to look after consumer rights. If one of these makes a super complaint, the government competition authorities have to investigate immediately.

There are 8 super complainers (here is a list of them from my least favourite website). They include CAMRA, a most excellent organisation that tries to keep beer cheap.

The ISA super complaint in fact has two parts:

(Read full article here.)

I have in fact experienced both of these problems.

My first ISA paid 4.6% interest, far above the Bank of England base rate and well above the inflation rate of the time. I was happy to leave my savings there, until one day I discovered that for six months I had only been receiving the much lower rate of 0.4%. The bank hadn't told me about the change.

Part of government policy to improve competition is to encourage information comparison websites about such products as bank accounts, insurance, home gas and electricity costs and telephone charges.

When consumers find out they can get better a deal with another company it should be made easy for them to switch to the cheaper provider.

Unfortunately though, most of the paperwork has to be done by the company who the consumer is leaving. Therefore, there is little incentive for this firm to do the paperwork quickly. In fact, switching often takes a very long time.

Last year it took 2 and a half months for me to switch my energy provider. My wife wanted to move her phone number from one mobile provider to another, and this took 2 weeks.

Strangely though, this BBC article reports a very high rate of consumer satisfaction with UK banks.

One aspect of economics I love is the detective work - of seeing beyond what seems to be a confusing surface picture to what really is happening.

Does the fact that only 7% of people with bank accounts are likely to switch next year prove they are happy with their accounts? Or is something else happening?

If you post a comment about this, I'll tell my recent experience with this also.

The final sentence of the quote above may help you, as may reading the full article.