Following on from its recent investigation into the capping of credit card penalty fees, the UK's Office of Fair Trading is believed to be poised to launch a fresh assault, this time on overdraft charges.
After a recent investigation, the OFT ordered credit card issuers to limit their penalty charges to GBP12, a move that forced many to cut their existing charge rate by more than half. Now, in response to a barrage of customer complaints, the OFT is reportedly ready to impose the same conditions on overdraft penalty charges.
Currently, most banks charge customers if they exceed their agreed overdraft limit. There are numerous ways in which the penalties are implemented. Some provider charge one set fee, while others will charge cumulative penalties depending on the number of days an account holder is beyond their limit.
However, customers have hit back, arguing the fees are unfair, disproportionate and in some cases illegal. While many banks will charge GBP20 to GBP30 in penalty fees, opposition campaigners argue the cost to the banks to administer overdrawn accounts amounts to mere pennies.
It is believed that the OFT will instigate an investigation into overdraft fees in the coming weeks once its activities regarding credit cards have been completed. The consumer watchdog is likely to call for a proportionate and fair charge, which many predict will match the GBP12 imposed on credit card issuers.
According to Which?, overdraft charges earn the banking industry in the UK an estimated GBP4.7 million per year.
With regard to its investigations into credit card penalty charges, the OFT is said to be close to reaching its final determination on the matter. Most issuers in the UK have already complied with the watchdog’s stipulation of a limit of GBP12. However, some have refused to accept the cap. The fate of the absenters will be known when the OFT reaches its final resolution.