Beware the penalty fare on financial products

20 August 2007
Surprisingly, there are now more charges on financial products than prior to the charges clampdown, according to moneysupermarket.com. It records that UK customers are now subject to 112 charges – up from 110 last year - across just five categories: current accounts, mortgages, savings accounts, loans and credit cards.

There has been a small reduction in the number of current account fees, which have fallen to 27 from 29. Nevertheless, fees for exceeding overdraft limits could still be as much as £30, while a bounced payment could incur a fee of £39.

Managing director at moneysupermarket.com, Stuart Glendinning, says: “It is galling that people are facing more penalties than last year, despite the OFT and FSA turning their attention to the issue. I am staggered that, despite intense media and regulatory attention, the majority of financial services providers are yet to make positive moves to reduce their charges.”

The highest number of penalty charges applies to mortgages, totalling 51. Some lenders are replacing exit administration fees with alternative fees and mortgage applicants also face charges if they wish to change their repayment method or if they wish to receive a copy of title documents – this can cost up to £40.

Just four charges relate to savings accounts, including withdrawal penalties and charges for not depositing the minimum amounts specified in the account’s terms and conditions.

Mr Glendinning adds: “A year on and providers are still giving with one hand and taking with the other. It is understandable that banks want to make up any profit lost by the clampdown on fees. But we are seeing sneaky tactics by some providers, who are renaming charges or introducing a new fee in their place – a practice that doesn’t treat customers fairly.”

Moneysupermarket’s research reveals that 11 fees apply on loans, including late payment fees of up to £30 and that unpaid direct debits or returned cheques can cost as much as £35.

The number of penalties on credit cards has increased from 17 to 19 in the last year, despite having been capped at £12 by the OFT.

“With so many default fees and charges in place, even the most astute consumer can fall foul. People deserve financial penalties to be transparent and fair from the outset,” says Mr Glendinning.

Find out more unfair bank charges