OFT - No 'Quick Fix' on Bank Charges

The OFT has backed off from making an immediate intervention to help consumers recover bank charges. In a move that will disappoint those millions of consumers that have been on the receiving end of illegal charges the OFT has announced that a review of charging policies will take place alongside a wider 'in-depth' 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.

In a statement released on 29th March, clearly influenced by the industry, the OFT expresses ongoing concern about the level and incidence of bank current account charges, but sets out its desire to look at the wider relationship between default charges and so called 'free' banking.

John Fingleton, OFT Chief Executive said: 'The UK retail banking market performs well in many dimensions, especially relative to international norms. However, the issue of bank current account charges is a matter of real concern to the banks' customers, and raises wider questions about competition and transparency of pricing. The initial scoping work we have undertaken has demonstrated to us that this is not only an issue for those people who are being charged, but also for customers who are not defaulting on their bank accounts.'

Debt on our Doorstep expresses concern that no action has yet been taken by the OFT to force banks to reimburse customers for the billions of pounds of unlawful charges that have been levied in the past six years, and that there appears to be a willingness to look the other way whilst charges are levied on those with the most financial problems in order to maintain a system of free banking for others.

Damon Gibbons, Chair of Debt on our Doorstep commented:

"The levying of unlawful fees on default is cross-subsidisation at its worst. It makes those with financial problems pay for free current account provision for those without difficulties. If the banks say that they would have to end free banking for the majority by staying within the law on default charges, then that would appear to indicate a real lack of competition in the sector.

Surely, banks should still be expected to compete on current account charges and stay within the law for people who have financial problems. Why it is taking the OFT so long to come that conclusion is a real mystery, but it isn't giving consumers a great deal of confidence in their regulator that's for sure."