Current accounts: are banks backing down?

Madeline Thomas on the latest reductions in charges
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The Independent Online

Alliance & Leicester has abolished some of its overdraft fees on current accounts and cut others. Could it signal a climbdown on charges by some high-street banks?

The Office of Fair Trading (OFT) is set to go head to head with eight banks and building societies in the High Court in January to test whether the level of overdraft charges is legal. Ahead of the case, it will publish a report.

OFT spokesman Jona- than Marciano says the court date could be avoided.

"If we do our own financial analysis and they [the banks] come in with a number that is lower than our analysis would suggest is an unfair charge, there is no need for the case to go ahead," says Mr Marciano.

But he doubts whether the banks would have time to lower their fees before the start of the court action.

A&L's is the most fundamental change announced by any bank to date. It is scrapping interest charges on unauthorised borrowing. Also gone are the £25 excess overdraft charge and the £25 fee for those still with an unauthorised loan five days later. In their place come two flat-rate charges – 50p per day up to a maximum £5 for those using their authorised overdraft, and £5 per day for those who exceed their limits.

Lloyds TSB recently cut its unauthorised overdraft rate from 29.8 to 19.3 per cent. Those exceeding their limit face a flat fee of £15 for each month in which that occurs, plus a rate of either £6, £15 or £20 (depending on the excess) for each day the limit is exceeded – up to a maximum of 10 days in any one month. The £30-a-day unauthorised overdraft fee (up to £90 a month) has gone.

The Halifax last month said it was to stop charging fees on fees. So now, if a customer exceeds an overdraft limit as a result of the bank applying a fee, they will no longer be charged on top.

HSBC, meanwhile, has scrapped its £25 referral fee, while its ATM network will warn customers if they are about to go into the red.

But Eric Leenders, from the British Bankers' Association (BBA), says this is not about running scared of the OFT. "Alliance & Leicester is not one of the eight banks [involved in the test case. Instead,] the consumer commentary around fees has set in train some changes to a product that has been largely untouched for 20 years."

Marc Gander, co-founder of the Consumer Action Group, which campaigns against bank charges, says: "It's very important for the test case to go ahead. Banks disregard social pressures, the law, even government bodies. It's appalling."

And it seems some banks are hell-bent on giving cam- paigners ammunition. Abbey has upped the fees for using its unauthorised overdraft facility, and First Direct has scrapped interest on its current account.

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