OFT widens bank charges study

By SASCHA HUTCHINSON
Updated:

 

The OFT has officially announced that it will investigate whether a crackdown on bank charges will result in the loss of free bank accounts, as it widens its study of retail banking.

Thousands of people continue to reclaim charges, which campaigners claim are unlawful, and so far none of the banks has defended its pricing structure, preferring to simply reimburse customers who are prepared to take them to court.

But while customers are able to reclaim unfair fees, banks are introducing extra charges to make up for the loss of revenue, and there is increasing concern that if the OFT were to cap charges the way it did for credit cards, then banks would start to introduce monthly fees for everyone.

Banks are not allowed to profit from dealing with customers who breach overdraft limits or have bounced cheques or direct debits, but the highest-charging banks hit customers with a fee of nearly £40 for sending out a standard letter. Estimates from banking experts put the cost of dealing with such defaults at between £2 and £5.

The OFT says the new study will consider the current level and incidence of the charges in the broader context of efficiency, transparency, value and consumer choice within personal current accounts.

It is already investigating bank charges and it was expected to make an announcement this month about what it considers to be a fair charge. That announcement was delayed after it said it needed more time to consider the more complex issues at stake.

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It indicated at the time that it was concerned that a cap on charges would lead to the end of free banking.

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OFT chief executive John Fingleton said: 'This market study will enable the OFT to consider wider questions about transparency and value in the provision of personal current accounts. This will provide the necessary context for assessing the fairness of unauthorised overdraft and returned item charges before we apply the law in this area.

'Our ultimate objective is a competitive retail banking market in which informed and active consumers drive strong competition and high levels of customer service among banks long-term, with minimum regulatory intervention.'

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