Squash some bank charges and others rise up in their place

As the watchdog prowls, current account customers suffer

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.

Independent Partners; request a free guide on NISAs from Hargreaves Lansdown

News
scienceExcitement from alien hunters at 'evidence' of extraterrestrial life
Life and Style
Customers can get their caffeine fix on the move
food + drink
News
newsRyan Crighton goes in search of the capo dei capi
Extras
indybest

PROMOTED VIDEO
Arts and Entertainment
Actors front row from left, Jared Leto, Jennifer Lawrence, Meryl Streep, Ellen DeGeneres, Bradley Cooper, Peter Nyongío Jr., and, second row, from left, Channing Tatum, Julia Roberts, Kevin Spacey, Brad Pitt, Lupita Nyongío and Angelina Jolie as they pose for a
film
Sport
sport
Life and Style
techCould new invention save millions in healthcare bills?
Sport
David Moyes gets soaked
sport Moyes becomes latest manager to take part in the ALS challenge
Voices
A meteor streaks across the sky during the Perseid Meteor Shower at a wind farm near Bogdanci, south of Skopje, Macedonia, in the early hours of 13 August
voicesHagel and Dempsey were pure Hollywood. They only needed Tom Cruise, says Robert Fisk
News
peopleEnglishman managed quintessential Hollywood restaurant Chasen's
Life and Style
food + drinkHarrods launches gourmet food qualification for staff
Arts and Entertainment
Michael Flatley prepares to bid farewell to the West End stage
danceMichael Flatley hits West End for last time alongside Team GB World champion Alice Upcott
Life and Style
Horst P Horst mid-fashion shoot in New York, 1949
fashionFar-reaching retrospective to celebrate Horst P Horst's six decades of creativity
News
Members and supporters of the lesbian, gay, bisexual, transgender (LGBT) community walk with a rainbow flag during a rally in July
i100
Life and Style
Black Ivory Coffee is made using beans plucked from elephants' waste after ingested by the animals
food + drinkFirm says it has created the "rarest" coffee in the world
Life and Style
news

As Voltaire once said, “Ice cream is exquisite. What a pity it isn’t illegal”

Life and Style
food + drinkThese simple recipes will have you refreshed within minutes
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Network Engineer - CCNP, Hedge Fund, London

    £50000 - £60000 per annum: Harrington Starr: Network Engineer - CCNP, Hedge Fu...

    Senior Network Engineer-CCIE, Multicast, Low Latency

    £60000 - £70000 per annum: Harrington Starr: Senior Network Engineer-CCIE, Mul...

    Network Infrastructure Engineer

    £30000 - £50000 per annum: Harrington Starr: Network Infrastructure Engineer (...

    Network Engineer (CCNP, BGP, Multicast)

    £35000 - £45000 per annum: Harrington Starr: Network Engineer (CCNP, BGP, Mult...

    Day In a Page

    All this talk of an ‘apocalyptic’ threat is simply childish

    Robert Fisk: All this talk of an ‘apocalyptic’ threat is simply childish

    Chuck Hagel and Martin Dempsey were pure Hollywood. They only needed Tom Cruise
    Mafia Dons: is the Camorra in control of the Granite City?

    Mafia Dons: is the Camorra in control of the Granite City?

    So claims an EU report which points to the Italian Mob’s alleged grip on everything from public works to property
    Emmys look set to overhaul the Oscars as Hollywood’s prize draw

    Emmys look set to overhaul the Oscars as Hollywood’s prize draw

    Once the poor relation, the awards show now has the top stars and boasts the best drama
    What happens to African migrants once they land in Italy during the summer?

    What happens to migrants once they land in Italy?

    Memphis Barker follows their trail through southern Europe
    French connection: After 1,300 years, there’s a bridge to Mont Saint-Michel

    French connection: After 1,300 years, there’s a bridge to Mont Saint-Michel

    The ugly causeway is being dismantled, an elegant connection erected in its place. So everyone’s happy, right?
    Frank Mugisha: Uganda's most outspoken gay rights activist on changing people's attitudes, coming out, and the threat of being attacked

    Frank Mugisha: 'Coming out was a gradual process '

    Uganda's most outspoken gay rights activist on changing people's attitudes, coming out, and the threat of being attacked
    Radio 1 to hire 'YouTube-famous' vloggers to broadcast online

    Radio 1’s new top ten

    The ‘vloggers’ signed up to find twentysomething audience
    David Abraham: Big ideas for the small screen

    David Abraham: Big ideas for the small screen

    A blistering attack on US influence on British television has lifted the savvy head of Channel 4 out of the shadows
    Florence Knight's perfect picnic: Make the most of summer's last Bank Holiday weekend

    Florence Knight's perfect picnic

    Polpetto's head chef shares her favourite recipes from Iced Earl Grey tea to baked peaches, mascarpone & brown sugar meringues...
    Horst P Horst: The fashion photography genius who inspired Madonna comes to the V&A

    Horst P Horst comes to the V&A

    The London's museum has delved into its archives to stage a far-reaching retrospective celebrating the photographer's six decades of creativity
    Mark Hix recipes: Try our chef's summery soups for a real seasonal refresher

    Mark Hix's summery soups

    Soup isn’t just about comforting broths and steaming hot bowls...
    Tim Sherwood column: 'It started as a three-horse race but turned into the Grand National'

    Tim Sherwood column

    I would have taken the Crystal Palace job if I’d been offered it soon after my interview... but the whole process dragged on so I had to pull out
    Eden Hazard: Young, gifted... not yet perfect

    Eden Hazard: Young, gifted... not yet perfect

    Eden Hazard admits he is still below the level of Ronaldo and Messi but, after a breakthrough season, is ready to thrill Chelsea’s fans
    Tim Howard: I’m an old dog. I don’t get too excited

    Tim Howard: I’m an old dog. I don’t get too excited

    The Everton and US goalkeeper was such a star at the World Cup that the President phoned to congratulate him... not that he knows what the fuss is all about
    Match of the Day at 50: Show reminds us that even the most revered BBC institution may have a finite lifespan – thanks to the opposition

    Tom Peck on Match of the Day at 50

    The show reminds us that even the most revered BBC institution may have a finite lifespan – thanks to the opposition