Don't Wait for Office of Fair Trading. Get Charges Back Now!
Bank customers who think they are being fleeced were urged not to wait for the Office of Fair Trading to crack down on charges before seeking redress yesterday.
The OFT, which mounted a review of bank charges in September, announced yesterday it was extending this to a study of retail bank pricing.
Full details of the study will be announced in late April, and it is expected to be completed by the end of the year.
The regulator said that on its initial finding it shared the public concern about the level and incidence of current account charges, but it has decided to dig deeper after realising that the issue was not straightforward.
One of the risks is that if the banks' fees from defaulting customers is clipped, they might seek to recoup this by introducing charges to customers who stay in the black.
This has been described as the waterbed effect - standing on it at one point transmits the pressure somewhere else.
A less generous interpretation might be that the "free" banking enjoyed by non-defaulting customers was being held to ransom.
Don't wait for OFT, watchdog advises
Customers who do slip into the red face charges ranging from £25 to nearly £40 a time if the bank pays an item when they are in the red, or if cheques or debit transactions are bounced. In some cases, it is claimed, the actual cost to banks is as little as £2.50.
However, when the OFT cracked down on the high charges exacted by credit card companies, there was a perception that interest rates had crept up as if to compensate, but this may not be easy to differentiate from normal fluctuations of the base lending rate.
In the meantime consumer groups urged customers who think they have been ripped off to demand refunds from their banks, rather than wait for the fair trading watchdogs to bite, or at least bark.
Emma Bandey, personal finance campaigner at Which?, said: "Today's announcement still leaves people in the dark. Before the end of the year consumers could be charged up to £3.5bn by their banks in unauthorised overdraft charges. Don't be put off claiming back your charges while the OFT's looking into this - claim now."
For Scottish customers the Financial Services Ombudsman may be the preferred route: the small claims courts in Scotland can only award a maximum of £750, whereas some claims could be worth thousands.
"Once you go to a higher court you have to bring in lawyers and risk incurring really heavy costs. It is just too much of a risk for families with not much money," said Julia Clarke, Which's Scottish spokeswoman. However the banks have rarely, if ever, failed to settle on cases brought through the Ombudsman.
John Fingleton, OFT chief executive said: "The issue of current account charges is a matter of real concern and raises wider questions about competition and transparency of pricing."
Lisa Taylor, of moneyfacts.co.uk, said: "If charges are spread to non-defaulting customers I don't think they will take it lying down."
The banks welcomed the OFT's acknowledgement that the issue was not straightforward, and said they were working with the regulator.
-- The Herald