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By Lorrie Kelly Staff Writer
Tuesday, 29 April 2008
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Clawing it back
What are some banks doing to claw back their losses?
- Increasing cash withdrawal charges (up by as much as 1%)
- Introducing annual fees to some accounts and/or cards
- Increasing interest rates marginally on credit cards
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ON the heels of the recent High Court decision to allow the Office of Fair Trading (OFT) to determine whether bank overdraft fees are fair, the question for consumers is - was this a Pyrrhic victory?
Although the High Court has ruled in favour of the Office of Fair Trading, giving them the right to examine existing bank overdraft charges, consumer celebration over the ruling may be short lived.
Spread the expense
The last time the OFT intervened over bank charges, lenders simply spread the expense to other areas not covered by the OFT agreement.
For example, credit card companies increased their cash withdrawal charges from 2% to 3%, annual fees were introduced and interest rates silently crept up.
Fees for current accounts
On this occasion, bank backlash has been a threat of imposing mandatory monthly fees for basic current accounts across the board in an attempt to recoup revenue losses.
And while the courts continue their determination process, all compensation claims against excessive bank overdraft charges will remain on hold.
The final outcome is far from determined and there is no guarantee that the OFT will take any action at all following their investigation.
Existing bank charges must be scrutinised under the Unfair Terms in Consumer Contracts Regulations 1999 to determine their legitimacy.
Dropped
And the possibility, though admittedly small, that existing charges are found to be fair by the OFT, would result in consumer compensation claims being dropped entirely.
But the final ruling on bank charges is still a long way off, pending the expected appeals.
While realists agree the most likely outcome will be a cap on overdraft charges going forward, some commentators believe that at best, consumers will not receive the windfall they may have been expecting, and at worst this saga will put the final nail in the coffin of free or low-cost personal banking.
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