The major high street banks have agreed to make overdraft charges fairer and more manageable, the Department for Business, Innovation and Skills (BIS) reported. But consumer bodies criticised the moves as "disappointing".
BIS said banks have signed up to a voluntary agreement that will apply to all full-facility current accounts. Balance alerts – which will warn customers when they are close to overdraft charges – will be introduced from March 2012.
Other measures, including annual charges statements and a buffer-zone – which will mean no charges if customers go over their limit by a small amount – will be introduced by March 2013. Barclays, HSBC, Lloyds, Royal Bank of Scotland and Santander have signed up to the agreement.
But Mike O'Connor, the chief executive of Consumer Focus, said: "It is disappointing that these measures are voluntary and that there are no plans to legislate to protect consumers from the effects of unfair bank charges."
Which's Richard Lloyd said the move would not persuade customers that banks are starting to play fair. "Although this is a step in the right direction, we know that people don't trust banks," he said. "Customers will need to be persuaded that any voluntary agreement to improve overdraft charges will actually deliver the promised benefits."
The Government also announced a crackdown on expensive store credit cards, including a ban on direct commissions for sales staff.