Massive mark-up on banks' penalty fees

13 December 2006
The penalty fees banks charge customers who fail to make repayments on time are subject to a significant mark-up, a study has found.

BBC2's The Money Programme undertook an investigation into the area of banking charges, which is already under scrutiny from the Office of Fair Trading (OFT), and found banks regularly charge customers £30 for a service which costs them £4.50 to carry out.

Stephen Hone, founder of the Penalty Charges campaign website, told the programme: "The banks have been scamming people for years on these charges and they are totally unlawful."

The programme reveals it costs banks only £2.50 to cope with unauthorised overdrafts from customers.

But chief executive designate of the British Bankers' Association, Angela Knight, told the programme: "They're not penalties, they're in fact service fees."

As many as 180,000 copies of a template letter which helps disgruntled customers take their bank to the small claims court to reclaim penalty money have been downloaded from the consumer website MoneySavingExpert.com.

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