Overdrafts 'stop bank current account switching'

http://www.bbc.co.uk/news/business-32826146

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Many bank customers with an overdraft mistakenly believe they are locked out of switching their current account provider, research has found.

These customers rarely switch or look around for a better current account deal elsewhere, the survey for the UK's competition authority found.

But many banks do accept new customers, even if they are overdrawn.

The research was released as part of a continuing investigation into the competitiveness of UK banks.

The final report from the Competition and Markets Authority (CMA) is not expected until April next year.

Speedier switching

The research showed that 85% of customers who were overdrawn for nine months or more of the year had not switched or looked around for a better deal.

The findings suggested this was at least partly because customers thought they would be unable to change provider as other banks would be unwilling to take them on.

No regulations exist that would prevent somebody with an overdraft from switching their account to a different bank, according to a spokesman for the Payments Council.

Banks or building societies could turn down an application, others might require the overdraft to be paid off, but some might agree to take on the debt.

The institution involved will give guidance to the customer about how a switch would work, the spokesman said.

Loyal customers

All current account holders can now move their bank account to another provider within seven working days, instead of up to 30 days under the previous regime.

The research showed that only 3% of customers asked in the survey had switched bank in the past year, with no sign of the number speeding up.

More than half of customers had been with their bank for more than 10 years, and 37% had stayed put for 20 years.

It found that the vast majority were satisfied with their current account provider.

A spokesman for the British Bankers' Association, which represents the UK's High Street banks, said: "All the banks have been working with the CMA as part of this ongoing inquiry. [This] statement takes a positive of view of recent innovations in retail banking and shows that more than 90% of current account customers are satisfied."