Overdraft charge crackdown

30 September 2005
The Office of Fair Trading has told banks and building societies that they will face investigation if they fail to comply with new fair charging guidelines.

Lloyds TSB, Barclays, HSBC and Nationwide have all adjusted charges to fall in line with new rules which will prevent banks and building societies from charging excessively for overdrafts, unpaid credit card bills and bounced checks and direct debits.

An OFT spokesperson said: "We believe that the same principles as those on credit cards should be implemented on all products. They should be cost effective and not be cross-subsidising.

"There is not an investigation at the moment, but we are looking at the situation.

"We would rather they take on board the guidance from us and the results of court cases and change their ways."

Lloyds TSB has decided to waive its £30 overdraft fee if it is the first time you are in the red, and HSBC will not charge you if the total amount owed on your overdraft is £10.

Barclays have adopted a similar arrangement whereby they will allow customers to go £5 into their overdraft without being charged.

Nationwide comes out cheapest, charging £15 for unauthorised borrowing and £28.50 for bounced payments.

Recent research by Egg revealed that a third of current account holders have paid as much as £100 in bank penalty charges over the past year.

Consumer watchdog Which? estimates that banks make over £3 million a year in unauthorised overdraft penalty charges.

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