OFT Looks at Unauthorised Overdraft Charges
Watchdog to examine whether unauthorised overdraft fees are too high
7th September 2006
The Office of Fair Trading (OFT) has confirmed that it is to examine the levels of charges banks levvy for unauthorised overdrafts after complaints from consumers that going a few pounds overdrawn can lead to huge fees.
The OFT will work with the Financial Services Authority and the British Bankers' Association over the next few months to investigate how the system currently works, before it decides whether a full investigation and possible action is warranted.
Most banks will impose a hefty charge of £25 or more when a customer goes overdrawn without permission, as well as charging interest on the overdrawn amount. There have been allegations that this fee includes a punitive element and is used as a profit-making device by the banks, something which is not allowed by the regulations: charges may only be made that cover the administration costs involved.
If the OFT decides that charges are needlessly high, it could put pressure on banks to lower them, as it has recently done in the case of credit card late payment charges. The option of using the courts to force charges down would also be available if needed.
The British Bankers' Association issued a statement saying that they believed the current charging system was fair and transparent.
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