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.
Mark Dampier: 'We're on our own in retirement. They've pulled pensions to pieces'
HSBC becomes first bank to offer five-year fixed rate mortgage with interest rate under 2%
Crippling PFI deals leave Britain £222bn in debt
Pension freedoms: How to deal with cold calls from scammers
Barclays new Blue Rewards hands cash to customers. What’s the catch?
- 1 Rarest Beanie Baby of them all could be sold for £62,500 on eBay
- 2 Ben Affleck asked TV chiefs to hide slave-owning ancestry, new hacked Sony emails published by Wikileaks claim
- 3 Driving while dehydrated can be just as dangerous as drink driving, study suggests
- 4 Farmer told to tear down mock-Tudor castle after hiding construction behind hay bales
- 5 One Direction: Louis Tomlinson launching his own record label, has already 'signed two acts'
If I’m being racially abused I don’t need a stranger with a saviour complex to rescue me
The only black face in the Ukip manifesto is on the page about overseas aid
Ukip is the only main political party to not address LGBT rights in its manifesto
Food banks: One million Britons will soon be using them, according to Trussell Trust
Religion isn't growing, it is becoming vigorous in its demise, says philosopher AC Grayling
BBC election debate: The one photo that summed up the whole 90-minute leaders debate
iJobs Money & Business
£20000 - £25000 per annum + OTE £45,000: SThree: SThree Group have been well e...
£50000 - £667000 per annum + excellent benefits : Ashdown Group: IT Manager / ...
£13000 - £20000 per annum: Recruitment Genius: Scotland's leading life insuran...
£40000 - £45000 per annum + benefits : Ashdown Group: Training Programme Manag...
Day In a Page
With space for an equestrian business, a greenhouse for growing your own veg, a wine store and a gym; this five-bedroom home has all the ingredients for a country retreat.
This four-bedroom home has exposed brick chimneys and a vaulted ceiling in a breakfast room that's ideal for summer entertaining - the doors open to the patio and garden.
The decked roof terrace of this two-bedroom flat is perfect for summer drinks while large windows and ample storage space make for a light and spacious interior.
Surrounded by approximately 15 acres of grounds, this six-bedroom grade II-listed home has been extensively refurbished yet retains many period features.
This four-bedroom home comes with a two-bedroom cottage and commercial office, with planning to extend, in a stunning courtyard setting.
In a pretty Norfolk village, this four-bedroom family home is surrounded by landscaped gardens, with even a self-contained annex for guests.
A few miles from the seaside at Perranporth, this four-bedroom farmhouse sits amongst nine acres of idyllic grounds - including a lake and two barns used as holiday lets.
This five-bedroom home is arranged over three floors of a converted Victorian hospital, offering spectacular views of the Pentland Hills - only three miles from the city centre.
This four-bedroom detached home comes with grounds that span to approximately 2.5 acres, as well as two large patio areas and a double garage.
This four-bedroom cottage is a Grade II-listed town house, well-located for the thriving market town of Nailsworth.
A four-bedroom apartment on the ground floor of a stunning period property in North Yorkshire, with two kitchens and a large south-west facing garden.
This high-spec two-bedroom home is part of a smart collection of new flats at Beaufort Park and has a large decked balcony that's perfect for summer drinks.
Capitalise on the fabulous views of Trevone Bay by taking two homes and creating one spacious boutique B&B. Just a cliff-top walk from Padstow.
Overlooking a golf course, this six-bedroom Edwardian detached home spans four storeys and retains many period features including the original, operational servants' bells...
On the edge of the city, this six-bedroom home comes with an outdoor swimming pool and a large garage block that has annexe potential.
In a Grade II-listed manor just outside of Bath, this three-bedroom home is arranged on two floors with a skylight in a vaulted roof line.
Open the living room's bi-fold wooden doors to reveal a retro-style kitchen, and a conservatory leading to a paved garden at this three-bedroom home.
A Grade II-listed, four-bedroom home, in a charming Somerset village, with a two-storey studio that could be converted into a holiday cottage
A modern four-bedroom Victorian home, within walking distance to the high street
A luxury apartment in the Gothic mansion of Wyfold Court in Kingwood, offers six bedrooms spread over three floors and a turret
This school conversion, near Stockwell Tube, oozes New York loft style. The one-bedroom flat features double height ceilings and exposed brick work
This six-bedroom Georgian home is on three floors with open fireplaces, a two-oven Aga, an annexe, and cottage gardens with outbuildings and a car barn
High Crest House covers an impressive 9384sq ft, with almost three acres of grounds including a tennis court and summer house enclosed by electric gates
A six-bedroom farmhouse with separate accommodation in converted stables. Situated in the village of Church Aston, within walking distance to the market town
A two-bedroom flat with under-heated walnut floors and bespoke built-in storage. The Tube and Clapham Common are a short stroll away
A refurbished seven-bedroom townhouse with staff quarters, cinema room, superb gym, steam room and plunge pool
A minimnalist four-bedroom home designed to the highest spec, featuring glass walls and a kitchen space lit by a glass roof
Hibernate during winter and make your living during the summer at this busy guesthouse with panoramic sea views, in the village of Lynton
A four-bedroom penthouse next to the Tate with direct views of St Paul's from two floors of luxurious living space
A four-bedroom detached home surrounded by spacious gardens and woodland, close to New Pudsey
An 18th-century, three-bedroom home near Langstone Harbour built from ships beams with vaulted ceilings and wood burning stoves
A five-bedroom semi-detached home with a mix of period and modern features in a popular and convenient location
This five-bedroom red-brick beauty overlooks the village green and sits in just under two acres of land
A three-bedroom villa with self-contained flat, minutes from Lake Windermere
A five-bedroom Victorian home with four receptions, superb gardens and paddock in Pembury
An eight-bedroom house on the south side of the The Green with cinema, wine cellars and summer house
This 17th century beauty is full of rustic cosiness, while the detached home office means you can also run a business
Four exclusive apartments in a Grade II-listed former medical school with 2,275 sq ft of living space and 18ft ceilings
A five-bedroom terraced house on the popular Peterborough Estate, ideally located for both Eel Brook Common and South Park
A state-of-the-art farm-building conversion on the former Cliveden Estate, with 11,420sq ft of internal space, cinema and wine cellar
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
A boutique mews house, set around a central courtyard, with three bedrooms and a private roof terrace
A four-bedroom farm-conversion with three bathrooms and two reception rooms
A two-bedroom detached house with ensuite bathrooms and a sun-drenched decked terrace, £750,000
A modern and spacious two-bedroom, penthouse flat with two bathrooms in a prestigious development
A beautifully renovated five-bedroom terrace with three reception rooms and a courtyard garden, £700,000
A four-bedroom period house which has been extended to provide almost 2,500sq ft of living space, £675,000
A pretty three-bedroom Georgian home with a 22ft drawing room and a master suite with a balcony, £525,000