OFT will keep an eye on banks for the charges they penalize their customers for overdrawing from their accounts.
In April, OFT asked credit card vendors to cut-down the penalties they inflict on delayed payment of fees and said that this decision also applies to charges imposed for mortgages, unauthorized overdrafts and store cards. Credit Suisse, at that time, estimated that banks in UK generate around 2 million GBP in revenue from these penalties. Since the decision, many credit card firms have reduced the penalty charges they impose on their customers for late payment.
OFT now aims to work for on applying this decision to current accounts after achieving success in retail-banking area.
"Reduction in default charges on credit cards came as a great news for customers. Now, we're extending that work, so tha we're informed about the default charges in account," stated John Fingleton, OFT's chief executive in news published by Reuters. Estimated time for this activity is 3-6 months following which OFT will decide for further investigations.
"Cutting down penalties won't affect banks much. Banks know how to make money and if one door is closed, they will open another one to increase their revenues," said an analyst at RNCOS.
British Bankers' Association (BBA), however, do not agree with OFT's decision but would assist OFT. "Our members are of the opinion that the current system of account charging is legal and fair. Unlike the majority of developed economies, most customers don't pay fees and still enjoy free-if-in-credit banking," said Ian Mullen, Chief Executive of BBA.
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