Unauthorised Bank Charges
December 4, 2007
Lloyds TSB has cut its penalty charges for some things, but customers may end up paying more. The bank recently promised to cut the cost of unauthorised borrowing, and said that the rate for an unauthorised overdraft would be cut from 29.8% to somewhere between 10 and 20% from 2 November. In addition the penalty charge for bounced or returned cheques will be reduced from £35 to £20.
As ever, things are not always what they might seem.
Currently if you exceed your overdraft you will be liable for a £30 penalty, with up to three charges per month. The new system will have a monthly penalty fee of £15 – reduced – but there will be an additional daily charge of between £6 and £20, depending on the overdraft’s size, for a maximum of ten days.
Consumer watchdog Which? magazine commented that the charges appeared excessive. An overdraft of £100 in a month could end costing you £200 in fees.
Other banks such as Abbey, HBOS & HSBC have all cut overdraft charges after being pressurised by consumer groups.
Those consumers who are looking for a decision on unfair bank charges may have to wait until mid-2008 before they see any redress. Banks in the middle of the dispute will be unable to satisfy the Office of Fair Trading (OFT) before it takes them to court in 2008, thereby eliminating any chance of savers getting any money back in the mean time.
The OFT offered to drop the High Court action against eight banks if the banks themselves came up with a solution. As an example Andy Bayes, head of current accounts at Alliance & Leicester, could see no solution until 2008. He said: “I don’t think they [the OFT] have clarity of what they want to do yet and I will be surprised if they come out with a clear statement before Christmas. If they don’t have an idea now after looking at this for nine months, you have to wonder how long into next year is it going to take them to be definite? You could be looking at half-way through the year.”
A&L is actually not one of the banks being taken to court, and it provided its own solution to the overcharging issue to the OFT. To be announced soon, the solution is expected to relate to an overhaul of its own charging structure. Charges in proportion to the size of the overdraft are probably the fairest solution, according to Bayes. However, these may end up being complicated and lead to undesirably long statements. The OFT want to move away from complexity too.
Recently the OFT estimated that fees and charges for going overdrawn without permission deliver between £2bn and £3.5bn a year to the UK banking industry’s revenue.
There are eight banks involved in the court case – which include Lloyds, Abbey, Barclays, Clydesdale Bank, Natwest and its owner RBS, HSBC, HBOS and Nationwide Building Society. All have said that the ongoing discussions with the OFT are ‘confidential’.
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