OFT to conduct investigation into overcharging by banks

OFT to conduct investigation into overcharging by banks

	Published : Fri, 08 Sep 2006 09:25 By : Phil Bateman Print this Story

LONDON - Taking into account the accusations of various consumer groups, Office of Fair Trading (OFT) has decided to conduct an investigation into amount of surcharge imposed by the banks for going overdrawn. Many hope that this will lead to the OFT forcing the banks to reduce the surcharge from next year.

The average surcharge shelled out by customers for being overdrawn or issuing bounced cheques is £25. The consumer groups hope that this will be reduced to around £12 following another directive issued by the OFT where in credit card companies should not charge more than £12 for those who miss a payment.

Clarifying the stand of OFT, its chief executive, John Fingleton, said, "The reduction of default charges in credit cards is great news for consumers. By taking an innovative approach to this issue, the OFT has brought about a significant change in one area of the financial-services sector,”

He added that they now wanted to extend this scrutiny to other areas. “We are now extending that work to inform ourselves about account default charges. We welcome the willingness of organizations such as the BBA to work with us in looking at the application of the principles we set out in April to this area".

The brief investigation is expected to take around six months to be completed and only then OFT will decided whether or not it should conduct a detailed investigation.

Members of the British Bankers' Association (BBA) were unhappy with the stance taken by the OFT and hope that the investigation will prove that the existing policies are legal and fair. However the BBA said that it would actively co-operate with the investigation.

The chief executive of BBA, Ian Mullen, said, "The banking industry welcomes the opportunity to work with the OFT on this fact-finding exercise, but our members remain of the view the current account charging system is fair and legal. The majority of customers do not pay fees and enjoy free in-credit banking, unlike the vast majority of developed economies". He added that though banks do charge its customers for going overdrawn, they do consider some exceptional cases wherein the surcharge is waived off.