Skip to main content

Bank charges: End in sight for heavy unauthorised overdraft fees

4

View comments

Shocks to the system: Banks will send warnings to customers who are close to going overdrawn

Extortionate bank charges of up to £25 for over-running overdrafts by a few pence will be removed within two years.

Other moves to empower consumers in their dealings with banks will include the right to switch current accounts to a new bank much more easily and swiftly, and text or email warnings to those who are nearing their overdrafts.

The new deal comes after the Office of Fair Trading lost its legal battle over bank charges with eight High Street institutions following a shock announcement by the Supreme Court in 2010.

But consumer groups are concerned that the success of new measures relies on trusting an industry which has a record of failing customers.

This is Money and Money Mail started highlighting the scourge of unfair bank charges for people going into unauthorised overdrafts almost a decade ago.

Customers began to challenge bank charges in court, using Unfair Terms in Consumer Contracts legislation. This is Money and Money Mail readers thanked our free guides and template letter for helping them to reclaim thousands of pounds in unfair charges.

However, after the small claims courts became overwhelmed, a test case was brought by the OFT against the major High Street banks to force a legal decision on charges. Initially, the consumer watchdog won but the banks appealed the decision all the way to the Supreme Court, where it was ruled that the the OFT did not have the right to assess the charges for fairness.

Details of the new deal were revealed by the Financial Secretary to the Treasury, Mark Hoban, and Consumer Affairs Minister Edward Davey.

Mr Hoban said: ‘The public told us they felt overdraft charges were unclear, and that it was unfair to be penalised for only going over your limit by a few pounds.

'The changes made as part of this review will empower consumers to make the right decisions for them and encourage responsible lending practices.’

Announcement: Consumer Affairs minister Edward Davey (left) and Financial Secretary to the Treasury Mark Hoban MP revealed details of the new deal

Ministers defended the decision to rely on voluntary measures, claiming it would deliver a quicker remedy than trying to change the law.

However, the current account balance alerts will not be available until March 2012, while the other measures will not be fully implemented until September 2013.

The official customer body, Consumer Focus, said it was concerned about the delay and the fact that the Government is relying on voluntary action from the big banks.

Its chief executive, Mike O’Connor, 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. This is tinkering around the edges when substantive reforms are needed.’ 

Enlarge  

Research by the consumer group Which? has identified scenarios in the past where a £50 overdraft could generate penalty charges of £165. This is Money has also encountered many examples where minor infringements ended up with customers plunged hundreds of pounds into debt by charges.

Bank charges have come down from their previous sky-high levels of up to £40 and banks have introduced some measures to limit them, but costs remain high and borrowers are still able to easily go over agreed overdraft limits delivering lucrative fees and interest rates for their bank.

Today, people might be charged £25 per month for an unauthorised overdraft and an interest rate of up to 29.99 per cent. Which? executive director, Richard Lloyd, said the public do not trust banks.

‘Customers will need to be persuaded that any voluntary agreement to improve overdraft charges will actually deliver the promised benefits,’ he said.

Pugh's view of the bank charges shake-up

‘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.’ 

Customers will still be allowed to go a few pounds into the red without being hit with a charge, but to date, no figure has been put on this ‘wiggle room’.

The move to speed up the ability to switch a current account is designed to increase competition in a market where, currently, adults are more likely to get divorced than change their bank.

The British Bankers’ Association insisted the proposals amount to ‘sweeping improvements’.

Its chief executive, Angela Knight, said: ‘Customers will, more easily, be able to exercise greater control over their current account to enable them to take action to, where possible, avoid incurring unarranged overdraft charges.’





Popular posts from this blog

Study Abroad USA, College of Charleston, Popular Courses, Alumni

Thinking for Study Abroad USA. School of Charleston, the wonderful grounds is situated in the actual middle of a verifiable city - Charleston. Get snatched up by the wonderful and customary engineering, beautiful pathways, or look at the advanced steel and glass building which houses the School of Business. The grounds additionally gives students simple admittance to a few major tech organizations like Amazon's CreateSpace, Google, TwitPic, and so on. The school offers students nearby as well as off-grounds convenience going from completely outfitted home lobbies to memorable homes. It is prepared to offer different types of assistance and facilities like clubs, associations, sporting exercises, support administrations, etc. To put it plainly, the school grounds is rising with energy and there will never be a dull second for students at the College of Charleston. Concentrate on Abroad USA is improving and remunerating for your future. The energetic grounds likewise houses various

Best MBA Online Colleges in the USA

“Opportunities never open, instead we create them for us”. Beginning with this amazing saying, let’s unbox today’s knowledge. Love Business and marketing? Want to make a high-paid career in business administration? Well, if yes, then mate, we have got you something amazing to do!   We all imagine an effortless future with a cozy house and a laptop. Well, well! You can make this happen. Today, with this guide, we will be exploring some of the top-notch online MBA universities and institutes in the USA. Let’s get started! Why learn Online MBA from the USA? Access to More Options This online era has given a second chance to children who want to reflect on their careers while managing their hectic schedules. In this, the internet has played a very crucial in rejuvenating schools, institutes, and colleges to give the best education to students across the globe. Graduating with Less Debt Regular classes from high reputed institutes often charge heavy tuition fees. However onl

Sickening moment maskless 'Karen' COUGHS in the face of grocery store customer, then claims she doesn't have to wear a mask because she 'isn't sick'

A woman was captured on camera following a customer through a supermarket as she coughs on her after claiming she does not need a mask because she is not sick.  Video of the incident, which has garnered hundreds of thousands of views on Twitter alone, allegedly took place in a Su per Saver in Lincoln, Nebraska according to Twitter user @davenewworld_2. In it, an unidentified woman was captured dramatically coughing as she smiles saying 'Excuse me! I'm coming through' in the direction of the customer recording her. Scroll down for video An unidentified woman was captured dramatically coughing as she smiles saying 'Excuse me! I'm coming through' in the direction of a woman recording her A woman was captured on camera following a customer as she coughs on her in a supermarket without a mask on claiming she does not need one because she is not sick @chaiteabugz #karen #covid #karens #karensgonewild #karensalert #masks we were just wearing a mask at the store. ¿ o