By Elliot Wright, 17th March 2010
Banks could save their customers hundreds of pounds worth of
bank charges by making their ovderdraft facilities optional, says
the Office of Fair Trading (OFT).
Currently, banks charge hefty unauthorised overdraft fees to
customers who exceed their agreed overdraft limit. However, the OFT
wants to make it impossible for a transaction to cause a customer
to dip into the red by having the bank refuse the transaction.
The proposal is just one of a number of measures designed to
make banking fairer for consumers in a study by the OFT into bank
charges.
The consumer watchdog said it wants banks to offer more options
for customers who do not want unarranged overdrafts, as well as
greater choice surrounding charging structures.
It also wants banks to lessen the severity of their bank
charges, which currently stand at around £17 for a refused payment
and £22 for each time a customer goes into an unauthorised
overdraft.
The report follows the banks' Supreme Court victory over the OFT
in which it was ruled that bank charges were not subject to OFT
regulation.
Millions of customers who had bank charge disputes on hold with
their banks on were left unable to reclaim their money, although
the OFT said its investigation had already "triggered substantial
changes" to the current account market.
John Fingleton, chief executive of the OFT, said: "We believe
that the commitments agreed by the industry today, along with
changes by individual banks already made or expected in the next
two years, should lead to a market that works better for
consumers.
"We will continue to closely monitor the banks and will
reconsider the need for action, including legislation, if they fail
to deliver these changes."
Kevin Mountford, head of banking at moneysupermarket.com, said:
"For those who are poor at managing their finances, this move can
only be seen as positive, because the charges related to
unauthorised borrowing are high to say the least.
"Banks will respond to this move by introducing a range of
accounts to suit the differing needs of their customers. It is
important when choosing a current account, to choose one that will
suit your needs. An account that prevents you from straying
overdrawn sounds attractive, but if you are unable to pay an
important bill or get cash then it may not be that suitable."
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