EU: Banks not transparent

Brussels - Banks often keep European consumers in the dark about how much they pay for their checking account each year, according to an EU study published Tuesday of 224 banks across the 27-nation bloc.

The European Commission said fees for three quarters of the banks it looked at were so unclear that it had to contact them individually for more information. And while many offered the information over the phone, the EU said they would not mail tariff lists.

The EU report highlighted four problem areas: opaque fees, a mishmash of rules for financial service contracts, dubious savings advice by banks and the fact that few Europeans switch banks for a better deal elsewhere.

EU officials said they would redouble efforts to get national governments to enforce consumer protection rules.

Many consumer bank contracts "are overly complex and, even worse, are not transparent," EU Consumer Affairs Commissioner Meglena Kuneva told a bankers' conference in Brussels. "Almost a third of consumers surveyed are not able to compare (checking) account offers and cannot choose the account that suits them best."

Kuneva noted last year's global financial meltdown was triggered by banks repackaging risky loans that were sold to consumers. Some borrowers were unable to keep up monthly repayments after the end of a period of low introductory interest rates - sending defaults soaring and ultimately undermining a network of complex investments based on those loans.

"We are quick to forget that this crisis originated and took root in the sale at the retail level of inadequate loans to consumers," she said.

Checking account fees vary widely in Europe, costing the most in Italy at 253 a year and the lowest in Bulgaria at 27, the EU report says.

It often isn't clear what those fees are, it said. Ten percent of banks don't publish their fees online and 33% don't post all details.

The study also criticised many banks for poor investment advice because bank managers get paid commissions to steer consumers to particular products.

In Germany, customers pull out of up to 80% of long-term investments because they received bad advice from their bank. This costs consumers some 20 to 30 billion, the report found. It said 24 of 25 German bank advisers it contacted gave "unsuitable" investment advice.

The report said consumer banking remains a static sector with only 9% of account holders switching banks for a better deal.

- AP