OFT widens bank charges probeIt'll also look at so-called free banking

26 April 2007

 

Twenty pound note and coins

If you're not getting the most from your account provider, you should take your business elsewhere

The government has today announced a wide-ranging investigation into the charges banks impose on their customers.

The Office of Fair Trading study will examine so-called free banking and the implications of moving towards charging customers for having a current account.

It will sit alongside an ongoing OFT investigation into the fairness of unauthorised overdraft fees levied by banks.

The watchdog said last month that a ‘quick fix solution’ over the penalty fee issue could have far-reaching and possibly detrimental consequences for consumers as a whole.

Bank charges

But the OFT has said it shares public concern over the current level and incidence of charges.

This wider study will examine whether the widespread provision of free banking delivers sufficiently high levels of transparency and value for customers.

It will also examine the implications for competition and consumers if there were a shift towards banks charging customers for having an account.

John Fingleton, Chief Executive of the OFT, said: ‘This market study will enable us to consider wider questions about transparency and value in the provision of personal accounts.

‘This will provide the necessary context for assessing the fairness of unauthorised overdraft and returned item charges before we apply the law in this area.

‘Our ultimate objective is a competitive retail banking market in which informed and active consumers drive strong competition and high levels of customer service among banks in the long-term, with minimum regulatory intervention.’

Current accounts

Which? personal finance campaigner Doug Taylor said: ‘This study is only necessary because the banking sector seems incapable of creating a fair deal for its customers.

‘Banks could save a lot of time, money and effort if they just opened up their books and showed us how they work out their charges. Prove to us you are being fair.

‘We hope that this study is not surrounded by endless spin from the banks claiming a reduction in charges will spell the end of so called 'free' banking. Banks aren't charities and they generate income from current accounts by paying low interest rates to their customers already.

'Which? will continue to encourage people to challenge unfair charges and use their power to switch banks if new charges appear.'

Which? believes that this study will only be successful if as a result customers are treated more fairly, unauthorised overdraft charges are cut to reflect costs and we have more transparent pricing.