PeoplesChampion welcomes Office of Fair Trading moves on unauthorised overdraft charges.

Consumers with bank accounts need to know the real charges of their overdrafts when they accidentally stray into the red, says Jim Spowart, the chairman of Peopleschampion.com.

“Banks are entitled to charge when a customer goes over their agreed limit. We are aware that the current levels appear rather high in some cases, so what we need is clarity,” he added.

Jim Spowart welcomes the Office of Fair Trading’s discussions with the banks about appropriate levels of charges for unauthorised overdrafts.
“We really don’t know how widespread this problem is in the UK. We don’t know how many people regularly break their agreed overdraft limits – and we don’t know how much money the banks make. Of course, the banks are allowed to charge for the extra risk assessment but it has to be commensurate. I think the OFT investigation will clear this up – and Peopleschampion.com welcomes it.”

Some banks charge three times as much interest on an unauthorised overdraft. In April, the OFT stated that credit card default charges were significantly higher level than was considered fair and set a £12 threshold unless there were exceptional business factors. Many banks have fallen into line with this.

The OFT will liaise closely with the Financial Services Authority and hold discussions with the British Bankers' Association to ensure default charges that are applied are identified and taken into account. The fact-finding exercise is expected to take between three to six months, then the OFT will consider whether a further investigation of the fairness of individual bank default charges is needed.

John Fingleton, Chief Executive of the OFT, says on his website: “We are now extending that work to inform ourselves about account default charges. We welcome the willingness of organisations such as the BBA to work with us in looking at the application of the principles we set out in the April to this area.”

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