Which? says bank charges agreement must deliverUnauthorised bank charges still too high

21 November 2011

bank notes and coins banknotes

Banks must prove they're serious about improving overdraft charges

The Department for Business, Innovation and Skills and HM Treasury today announced a new voluntary agreement designed to make charges for unarranged overdrafts clearer, fairer and more manageable. 

Under the new agreement a package of measures has been put together with the major banks which focuses on improving current accounts.

Bank charges to be made clearer

The agreement, which is voluntary and will apply to all full-facility current accounts, includes commitments to making the costs of unarranged overdrafts clearer and easier to understand as well as improving the control customers have over their unarranged overdrafts.  

The major banks have agreed, from the end of this year, to send an annual statement to each customer detailing how much they're paid for their bank account over the last year.  

The banks have also committed to providing an option for an alert to be sent when a customer's balance is low, ensuring that personal current accounts include a buffer, and notifying customers of the time of day by which they must pay in money to avoid an unarranged overdraft. 

Bank charges agreement is a step in right direction

In response to this announcement, Richard Lloyd, Which? executive director said: 'Although this is a step in the right direction, we know that people don't trust banks. Customers will need to be persuaded that any voluntary agreement to improve overdraft charges will actually deliver the promised benefits. 

'It's right that some banks do what they can to stop people going overdrawn, and text and email alerts will certainly help, but banks should treat people fairly and not charge for these services. The buffer-zone is also a positive move, but it's essential that we have clarity on whether they apply to basic bank accounts too.

'Unauthorised overdraft charges can incur interest of over 2000% APR.  It's therefore essential that the Government includes them in their study of high cost credit'. 

Unauthorised overdraft charges

Which? also wants banks to provide data files to consumers about how they use their current account.  This will allow people to make 'one click' comparisons to see whether they could get a better deal elsewhere. Relying on more paper statements will not accomplish this. 

If you think you have been unfairly stung by unauthorised overdraft fees, complain to your bank. Our guide to unfair overdraft charges explains in what circumstances you can make a complaint and what counts as 'unfair'.

More on this...

  • Bank account fees - find out what your bank might charge you for using your current account
  • Find the right bank account if you're overdrawn - our guide helps you choose an account to suit you
  • Best rate bank accounts - the best accounts whether you bank in credit or use your overdraft