Banks recoup unfair bank charges by hiking packaged current account fees

08 May 2008 / by Rachael Stiles
In what is thought to be an attempt to pre-empt a decision on unfair bank charges by the Office of Fair Trading (OFT), banks have hiked the price of their packaged current accounts.

Millions of current account customers who pay for packaged current accounts face increases of as much as 20 per cent in their monthly cost, if they have not already done so.

Lloyds TSB increased the fees on its Gold and Platinum accounts by £2 to £12 and £17 respectively from May 1, and Royal bank of Scotland and Natwest will also be hiking their rates.

The banks have defended the rises in cost by saying that they reflect the enhanced benefits of such accounts, which include mobile phone insurance, travel insurance and breakdown cover.

Following a recent decision by the high court which said that the OFT can decide whether or not unfair bank charges – often as much as £39 – for exceeding their terms and conditions are unfair, critics think that the banks are racing to beat the OFT's decision, which could result in thousands of people reclaiming bank charges and further fees being capped to reflect the actual costs incurred by the banks.

Each of the aforementioned banks were among those involved in the test case, and this increase in fees for packaged current accounts could be seen as a new way for the banks to recoup their losses if they are forced to repay the estimated £700 million in charges which customers would be owed.

It could also be an attempt at finding a new way to raise profits once they have lost the £3.5 billion annual revenue that the charges were bringing in.

A report from Lloyds after the high court test case concluded at the end of April, said: "We are pleased that a decision from the initial stage of the test case has been reached as it takes us closer to getting clarity for our customers. The court has confirmed that unauthorised overdraft fees are not default or penalty fees, but fees for a service as the banks have always maintained.

"While the court has concluded that the fees are assessable for fairness, the Judge was explicit in stating that this does not mean that they are unfair. Subject to any appeals, whether the charges are unfair will need to be clarified by the courts during the next stage of the test case."

© Fair Investment Company Ltd