Bank charges under fire by the Office of Fair Trading

Grovelawn Financial News 16/07/2008

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Banking industry disagrees with report

An investigation by the Office of Fair Trading (OFT) which has based its findings on figures from 2006 has found that, in its opinion, the current account market is not offering good value to consumers.

John Fingleton, the chief executive of the OFT, said “There is much banks can do to improve how the market works”. The OFT will be spending the coming months working alongside the banks in order to help improve their standards but have said they would be willing to impose heavy regulation regarding current accounts or will make a referral to the Competition Commission.

The Chief Executive of the British Bankers’ Association was unhappy with the findings of the report and was dismissive of the report’s claim that each active account made banks on average £152. She said that banks would have to make up their revenue from other charges if it was forced by the OFT to lower their current charges.

Amongst the report’s findings were;

  • Many customers had no idea of the amount they have been charged in bank fees
  • An estimated £1.4 million people had paid more than £500 on bank charges
  • Four million had been charged £200 or more
  • Over 75 per cent of current account holders did not know their accounts rate of interest
  • Fund charges rose by 17 per cent between 2003 and 2007
  • Banks earned 81 per cent of their income from bank charges of over £2.6 billion annually
  • Banks earned £4.1 billion from interest payments on overdraft facilities
  • Current accounts generated more for banks than credit cards and savings combined
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