Squash some bank charges and others rise up in their place
As the watchdog prowls, current account customers suffer
Sunday 08 October 2006
The Office of Fair Trading (OFT) is digging deep.
A third of the way into a fact-finding exercise to gauge the justice - or otherwise - of £30 penalties on current accounts, the regulator is still sifting through reams of information about bank charges.
It plans to report back before Christmas on the penalties for customers who don't seek authorisation before going into the red - whether it's a direct debit paid without sufficient funds, a bounced cheque or a breach of an agreed overdraft.
If it finds enough to suggest that bank fines are unfairly large, the OFT will instigate an in-depth study. This could lead - as it did with the recent investigation into credit cards - to demands that fees be slashed.
That would be a heavy blow for the banks: earlier this year, a report by investment bank Credit Suisse estimated that the fees generate £2bn a year.
Although £30 is an average, they can be as high as £38 at NatWest for a bounced cheque.
Consumer champion Which? has encouraged consumers to challenge the size of the fees in the small claims court, claiming they're illegal and don't represent the real cost to the financial institutions.
In many cases so far, high-street banks have backed down and settled out of court. But concern is now growing that they will try to sting customers with other charges, in anticipation of lost revenue in the future.
A recent report by accountancy firm Price-waterhouseCoopers on the credit card market warned of this "waterbed effect". It offered a vision of how the lower penalty payments forced on lenders are simply recouped elsewhere.
This is already happening with cards. After the OFT halved late-payment fees to £12, providers introduced uncapped balance-transfer fees, higher annual percentage rates (APRs) and changes in the repayment order so that expensive debt racked up extra interest.
With current accounts, banks are expected to move early rather than wait for the fallout from an unfavourable OFT conclusion.
On the radar already is Lloyds TSB: on 1 November, it ushers in current account changes that will punish many customers.
This move is significant since it has the biggest slice of the current account market, with millions of Britons paying their salary into Lloyds TSB accounts.
A list of the bank's changes, outlined in recent letters to customers, reveals the scope of its efforts to raise money. First, a £10 buffer fee for agreed overdrafts will be abolished. Dip over your limit by as little as £1 and you'll be hit with a £30 fee.
Next up is the cancellation of a "waiver" service. At the moment, customers who have not gone overdrawn within a 12-month period are spared any charges the first time they do fall from grace; from 1 November, they'll have to cough up £30.
However, exceptions are made for students and those prepared to pay service fees for a Premier or Platinum Lloyds TSB account. These customers can still breach their overdraft and not have to worry about penalties.
At least the bank is drawing the line somewhere, though, as no more than three separate charges will apply in any one month. So the most people will have to pay is three times the £35 fee for a"bounced item" - £105.
A Lloyds TSB spokes- woman denies that the charges relate to the watchdog's inquiry. "This is nothing to do with OFT changes; we regularly review what customers want and how we appoint these things.
"They only affect those who go into unauthorised borrowing."
Nick White of the price-comparison website uSwitch.com disagrees. He brands the new policy as "another tactic to boost revenue before any OFT investigation".
Other banks are expected to follow suit.
Andrew Hagger of financial analyst Moneyfacts sees the banks' moves as pre-emptive strikes. "It's different from the credit card investigation. With the current account inquiry, banks are getting in first; with credit cards, they got in afterwards."
Mr Hagger describes Lloyds TSB's abolition of the overdraft fee waiver as a "bold statement. If you're a customer, how are you going to feel about that?"
A spokesman for the OFT won't comment on any individual bank's behaviour but stresses that as long as their behaviour is transparent "and consumers can see what is going on", then that is acceptable.
"It might be a chore but it's worth checking the terms and conditions of your current account ," says a Which? spokesman. "With all the changes going on, it will be worth watching out for those banks that don't penalise their customers, and switching to them."
As well as changes such as those at Lloyds TSB, look out in particular for announcements about overdraft rates and interest on balances in credit.
- 1 I was a Woman Against Feminism too
- 2 Students offered grants if they tweet pro-Israeli propaganda
- 3 The Tory donor whose firm is one of Britain’s biggest tax avoiders - with HMRC's blessing
- 4 John Barrowman praised for Commonwealth Games opening ceremony gay kiss
- 5 Israel has discovered that it's no longer so easy to get away with murder in the age of social media
Malaysia Airlines MH17 crash: Vladimir Putin is given 'one last chance' to end hostilities in Ukraine
The 'scroungers’ fight back: The welfare claimants battling to alter stereotypes
The truth about conspiracy theories is that some require considering
Malaysia Airlines MH17 crash: Ukrainian military jet was flying close to passenger plane before it was shot down, says Russian officer
Malaysia Airlines MH17 crash: Massive rise in sale of British arms to Russia
Malaysia Airlines MH17 crash: victims’ bodies bundled in black bags and loaded onto trains
iJobs Money & Business
£18000 - £20000 per annum + OTE £25K: SThree: SThree Group has been well estab...
competitive: Progressive Recruitment: This really is a fantastic chance to joi...
£40000 - £60000 per annum + BONUS + BENEFITS: Harrington Starr: CXL, Triple Po...
£60000 - £75000 per annum + BONUS + BENEFITS: Harrington Starr: Business Anal...
Day In a Page
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village
A one-bedroom, luxury apartment with private gym and concierge service in Moorgate
A four-bedroom house in Hermitage Gardens with three reception rooms and landscaped gardens
A seven-bedroom Grade II-listed property with a separate self-contained apartment
A five-bedroom Victorian house with three reception rooms and galleried landing, £695,000
A six-bedroom farmhouse with five acres of land in a former cloth-making village
A secluded seven-bedroom detached house with large private garden, £490,000
A three-bedroom cottage overlooking Sarratt village green with open fires and solid oak floors
A three-bedroom maisonette flat in a Grade I-listed, Georgian townhouse in a sought-after location
A one-bedroom apartment located within a private gated development, north of Turnham Green
Look forward to a brighter future at two-bedroom Sunny Cottages, ideal for Londoners looking to downsize
A three-bedroom red-brick cottage with outbuildings and pretty gardens, £200,000
This three-bedroom flat within a former textile factory spans the corner of the fourth floor and has a balcony
A charming four-bedroom Oxfordshire cottage with oak floors and chunky-beamed ceilings, £465,000
A beautiful one-bed flat in a sought-after portered block, with access to Norland Square communal gardens
A one-bedroom flat within a Sixties school conversion with high-spec design and open-plan kitchen, close to Lambeth North Tube, £435,000
A 17th century four-bedroom house, with open fireplaces, cellar and pool, £600,000
A three-bedroom, coach house with luxury open-plan living space and contemporary breakfast bar