Money News: After the card clampdown, OFT looks at overdraft charges

The Office of Fair Trading is to "turn its attention to current accounts" and look into the fees levied on overdrafts.
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The Independent Online

The announcement came as the watchdog wound up its investigation of credit card charges. In April, it told providers to cut the penalties levied for late or missed payments - by 50 per cent in some cases - to £12. It also said the principle behind that decision applied to other default charges, including unauthorised overdrafts.

Since the ruling, most banks and card issuers have cut their credit card penalties, and the OFT said last Thursday that "no further intervention is warranted".

But it said that it would "undertake further work on the application of these principles to bank current accounts". This will take the form of a fact-finding exercise expected to last between three and six months. The OFT will then decide whether to proceed with a full investigation.

The British Bankers' Association said it "welcomed the chance to work on the exercise" but insisted that its members "remain of the view that the current account charging system is fair and legal".

The consumer body Which? said it was pleased that the sector was having to justify what it charges when customers go over their overdraft limits.

However, worries are growing that financial institutions have started to recoup the lost revenue on credit card penalties by making changes elsewhere. "Since the beginning of September, Lloyds TSB, NatWest and Smile have all announced an increase in their overdraft rates," said Nick White at the price-comparison service uSwitch.

Interest rates: Expect another rise in November

The Bank of England has kept the base rate on hold at 4.75 per cent - a month after its shock quarter-point hike in August.

But with the UK economy growing robustly, and figures from the Halifax showing that house prices rose by 1 per cent in August alone, many predict interest rates will go up again soon.

Economists warn of a further rise to 5 per cent by the end of the year - with many predicting November.

Barry Naisbitt, chief economist at Abbey, said the decision reflected a "wait- and-see approach", as the Bank assesses whether last month's change has had any impact on economic activity and inflation expectations.

Drew Wotherspoon from broker John Charcol agrees that November is the most likely time for another quarter-point rise - to coincide with the next quarterly inflation report.

Interest rates: Expect another rise in November

Smaller telephone companies offer better service than giants such as BT and NTL, according to new findings from Which?

The consumer body found Saga and Phone Co-op customers were among the most satisfied with their home-phone provider's service.

NTL languished at the bottom of the pile with just a fifth of customers saying they were "very satisfied". Only a quarter of BT customers gave this response.

Tesco, Toucan and Utility Warehouse all fared well for providing easy access to customer-support staff.

"With smaller firms and supermarkets overtaking traditional providers, they're in danger of being knocked off their perch if they don't start treating customers better," said Which? spokesman Neil Fowler. "Our findings show seven out of 10 people who switch end up paying less."

BT dismissed the report as "highly misleading" and based on "unreliable data". It added that 100,000 customers come back to BT every month.

NTL said it was "100 per cent committed to improving customer service".

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