MPs have issued banks with a "wake-up call" over confusing customers, and urged an official probe into the small business market.

A House of Commons Treasury Committee criticised banks over a "lack of transparency" in their presentations of credit card interest rate charges.

The perception is that the consumer is being ripped off. Let's make sure that isn't the case

John McFall MP

A Cambridge University mathematics chief, Dr Robert Hunt, who investigated one deal took most of an afternoon to calculate the annual interest rate.

"Even banks appeared to have difficulty understanding this aspect of competitors' products," committee chairman John McFall, a Labour MP, said.

The all-party committee also called for "remedial action" in the banking market for smaller companies, over fears that the "big four" UK banks operated a joint monopoly.

And the report came as consumer group Which forecast that big banks were set to suffer a spate of defections by customers seeking higher interest rates offered by, typically smaller, rivals.

Customers let down

The committee said that while it understood the need to offer customers a range of financial products, it was concerned that comprehending deals required "an unreasonable amount of time and effort".

John McFall: Bank customers "confused"

"We believe that customers should not have to engage in 'assiduous research' to understand financial products," the report said.

"[We] urge all banks to review their promotional material with a view to achieving genuine transparency."

Mr McFall said that the complexity of credit card deals did not "serve the interests of the consumer well".

"This is a wake-up call for banks and others," he told BBC Radio 4's Today programme.

He told BBC Breakfast: "The perception is that the consumer is being ripped off. Let's make sure that isn't the case."

Ian Mullen, chief executive of the British Bankers Association, told BBC Radio 4's Today programme the industry would look at how to make charges easier to understand.

The calculations were "transparent but complex", argued Mr Mullen

Monopoly fears

The committee's calls for an Office of Fair Trading probe into the banking market for smaller firms followed widespread concerns over the grip of the big four - Barclays, Lloyds TSB, HSBC and Royal Bank of Scotland.

Once again, a report by a committee of MP's has highlighted major problems in the banking sector

Ashleye Sharpe, Which

The Competition Commission last year warned of a "complex monopoly" operated by the big four, while the government has proposed forcing the banks to offer interest on accounts held by small and medium sized businesses (SMEs).

"The SME banking sector is still dominated by the major four clearing banks, despite new entrants, and... insufficient competition exists," Tuesday's report said.

"The cost of this monopoly situation is borne by SMEs, a vital component of the UK economy, and as such remedial action is required."

Desertion forecast

The findings were questioned by Barclays, which said that competition for small business customers was "fierce", and that it was easy to switch accounts.

And a Lloyds TSB spokesman said the bank felt its services offered excellent value to customers.

But the committee was supported by Which, the consumer group which has campaigned for greater transparency in the banking market.

"Once again, a report by a committee of MP's has highlighted major problems in the banking sector," Which's head of money research, Ashleye Sharpe, said.

"We particularly welcome the recognition by the Committee that effective competition in financial services requires consumers to understand the financial products they buy."

A Which paper on Monday forecast that the proportion of the big four banks' customers switching accounts to rivals offering higher interest rates would rise to 3.5%.

This rate of changeover is three times that identified in a government study two years ago.

While many established banks offer interest of 0.1% on credit balances, and charge 18% APR for overdrafts, some rivals pay 3% on current accounts, and less than 10% for overdrafts.