Sam Dunn: Banks on the leash, but they won't lie down

The unspoken message on free banking was: don't push us too far. The OFT may have drawn blood but the real battle has only just begun

Consumer groups are smiling from ear to ear, and no wonder. The Office of Fair Trading announced last week that it would order credit card lenders to slash their fees for late or returned repayments (see the page opposite) and gave notice that current-account overdraft penalties were also in the firing line.

But while the likes of the National Consumer Council and Citizens Advice Bureau expressed their delight at the prospect of less punitive charges, others began to brood.

If these proposed fee cuts deprive the banking and lending industry of as much as £1bn in profits, as estimated by investment house Credit Suisse, then you can bet they will find some way of clawing that money back.

Defaqto, a financial analyst, estimates that 0 per cent credit card deals, already shrinking in number, could be the first to die.

Others warn of generally higher annual percentage rates, as much as 2 points more, on our plastic.

Credit specialists at accountants Pricewaterhouse- Coopers, meanwhile, warn of a "waterbed" effect: while card customers benefit from lower charges, higher fees will simply be levied elsewhere in the panoply of costs that plague our personal finances.

The British Bankers' Association (BBA) has made it clear that its members are unhappy. In particular, it rejects outright the OFT's assertion that the principles behind slashing credit card charges should apply to bank accounts too.

More alarmingly, the BBA has gone to great pains to stress that the UK is one of the few countries to enjoy free banking - free debit cards, current accounts, high-street cash machines and so on.

Although it hasn't overtly threatened an end to this, its message is clear: push us too far and we may have to reconsider.

However, in the short to medium term, it's difficult to see this happening. Competition between banks for new current account custom is ferocious, with all sorts of promotions such as linked high-interest savings accounts and cheap overdrafts. Any introduction of a new fee would immediately dent a particular lender's appeal.

Similarly, unless all banks were to introduce fees on ordinary current accounts at the same time, the first to do so would suffer such a public blow to its reputation that it could lose both potential and existing customers.

That leaves slipping in new charges by stealth, and today's savvy customers - ably assisted by consumer groups such as Which?, which live to breathe down the banks' necks - are more alert to any tricks that financial institutions might try to turn.

In any event, a Treasury Select Committee hell-bent on getting two million "unbanked" low-income individuals into mainstream current accounts would no doubt have something to say about new fees.

There could be a chink in the armour, though.

It's worth remembering that millions already choose to pay for a current account - in the shape of a monthly retainer for packaged accounts festooned with trimmings such as travel insurance or a £500 interest-free overdraft.

As evidence of willingness to pay, this could be a lever for the banks to soften resistance to any sort of general fees.

The OFT may have drawn blood with a moral victory but, as battles go, the real fighting has only just begun.