The head of the Office of Fair Trading says bank charges are not forced on customers merely to cover costs and services; they are imposed so that banks can make billions of pounds in profits.
In his first full interview about bank charges, OFT chief executive John Fingleton told BBC2’s Money Programme (to be broadcast tonight), that an end to the charges would also see the end of free banking but also argues there is already no such thing as free banking and that the charges act as a “stealth” tax to make banks billions of pounds.
As reported on the BBC’s website, Mr Fingleton accuses the banks of using “hidden extras” and “tricks” in order to not only recoup their losses when customers exceed overdraft limits or bounce cheques, but also to generate more than £3.5 billion a year, £1.2 billion of which is pure profit, according to Credit Suisse.
It is hoped that the much disputed issue of bank charges will be settled once and for all in a test case scheduled for early 2008, which will determine the legality of such fees. The OFT wants the case to see an end to the charges and a much more transparent system of charging put in place.
Currently, customers “don't see what they pay”, Mr Fingleton told the BBC, and “very often they pay when an unexpected event happens like an unauthorised unexpected overdraft.” He would like a system whereby there is a “fundamental change in the behaviour of banks in the market place.” which will mean customers are not exposed to “hidden extras” and that the pricing is “fair and simple to understand.”
The banks’ defense is that these fees cover their costs, and that scrapping them would mean monthly charges that are more expensive than the current charge system, but the OFT does dismisses this claim and maintains that a clearer system is in the best interest of the consumer.
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