OFT To Study Bank Charges

by Robin Pilgrim, LawAndTax-News.com, London

27 April 2007

The UK's Office of Fair Trading (OFT) on Thursday launched a market study into personal bank current account pricing, alongside a formal investigation into the fairness of charges for unauthorised overdrafts and returned items.

The study aims to help the OFT consider the current level and incidence of the charges in the broader context of efficiency, transparency, value and consumer choice within personal current accounts.

This follows the OFT's recent fact-finding exercise into unauthorised overdraft charges, an issue currently causing a great deal of controversy in the UK.

According to the Office of Fair Trading:

"The OFT shares public concern about the current level and incidence of charges, but believes any quick-fix solution might have unintended and far-reaching consequences across the sector and for consumers as a whole."

The wider study will examine:

• Whether the widespread provision of so-called free banking delivers sufficiently high levels of transparency and value for customers;
• The implications for competition and consumers if there were a shift away from the widespread provision of these type of current accounts; and
• The fairness and impact on consumers of the incidence and level of unauthorised overdraft charges, in the context of other charges and any interest payments made for current account services.

John Fingleton, OFT Chief Executive, announced that:

'This market study will enable the OFT to consider wider questions about transparency and value in the provision of personal current accounts. This will provide the necessary context for assessing the fairness of unauthorised overdraft and returned item charge before we apply the law in this area. Our ultimate objective is a competitive retail banking market in which informed and active consumers drive strong competition and high levels of customer service among banks long-term, with minimum regulatory intervention.'

The OFT market study will be undertaken in consultation with industry, industry representatives and consumer advice bodies, as well as the Financial Services Authority (FSA), Financial Ombudsman Service (FOS) and government.

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