Free Banking or Unfair Bank Charges

In the news of late there has been a lot of speculation regarding the OFT test case regarding overdraft fees that banks have been charging. The court case involves eight banks, Abbey, Barclays, Clydesdale, HBOS, HSBC, Nationwide, Royal Bank of Scotland, and Lloyds TSB. These banks are being looked at for their bank charges regarding overdrafts fees based on the law of unfair banking practices. The case began on Monday the 14th.

The OFT decided that the banks were charging too much for their fees under the law. In some cases the banks have been charging forty pounds, as have some of the building societies. Since the customers have been complaining about these fees the OFT decided it was time to do something about them. For most of the customers they have been receiving these overdraft charges for bounced cheques. Of course the bank is arguing that if they do not pay the fees they will not learn to control spending, and avoid paying such high fees in the future. They are further arguing that the banks must charge these high fees in order to recoup the money they are spending for the bounced cheque.

What has the OFT in such a high state is the fact that while the fees are legal they don’t believe the banks should be charging to cover the administration costs and that the high cost of forty pounds is too high regarding the actual fees the bank has to cover for the bounce cheques or other overdraft issues. Angela Knight is one of the banks’ chief executives. She believes as does the bank that the fees being charged are fair and made clear when the consumer opens the bank account.

The trouble with the case has been the threat of repercussions. While it would be a great thing to see the OFT win the case and get the fees lowered for consumers there is the possibility that the actual banking options will change. Largely in the last three years many of the banks have been offering free banking. This means that there have been no fees to have a checking account and savings account. The banks are saying that if they must cut their charges in other areas such as the overdraft fees they will no longer be able to offer free banking to their consumers. This means that the consumers will have to choose which is more important to them and will the OFT.

Other threats that are occurring because of the case in regards to accounts are the current accounts. The current accounts are making interest at the moment, but if the banks lose the case they may just take away the interest earning accounts and offer an account a consumer will have to pay for. It seems that while there are many suffering from unfair fees regarding overdrafts that many don’t want to see free banking end. In other words those who can manage their accounts without overdraft fees will in actuality be paying for other customers mistakes.

Back To January 2008 Financial News
Purchasing with Credit Cards
Traps with Credit Cards
Understanding Credit Scoring
What Is A Credit Reference Agency
Testing Your Debt
10 Ways To Save Money
Benefits of Savings
How To Save of Invest Your Money
Individual Savings Accounts
Sainsbury’s Bank Internet Savings Account
Product Types For Savings
Saving with Child Trust Funds
Savings and Investments Advice
Trouble Ahead with Free Banking
Warning: Savings Rate Change
What Makes Consistent Savings Account?
Credit Building Solutions
Britain Needs to Protect Itself
Free Banking or Unfair Bank Charges
Reintroducing Child Savings
How To Get The Most From Reward Credit Cards - Part 1
How To Get The Most From Reward Credit Cards - Part 2
UK Economy Growth
UK Rate Cut
US Recession and Britain