OFT cracks whip over bank profits from account charges
Regulators set to take action is banks fail to make changes soonThe Office of Fair Trading (OFT) last month accused banks of operating personal current accounts 'opaquely' - costing consumers billions of pounds.
The OFT's report: 'Personal current accounts in the UK' found that 81 per cent of banks' revenue from current accounts comes from two sources: insufficient funds charges (£2.6bn) and net credit interest income (£4.1bn). Current accounts make more than credit cards and savings accounts combined.
Insufficient funds charges rose by 17 per cent in real terms between 2003 and 2007. Over 12.6m accounts (23 per cent of active accounts) incurred at least one insufficient funds charge in 2006.
In Addition, a minority of customers end up paying much more for their current account than others. In 2006 1.4m people paid over £500 in charges according to the report.
The OFT will now consult with banks and other stakeholders to try and effect voluntary change. If this fails it could move to more regulatory intervention or refer the market to the Competition Commission.
In a statement, the British Bankers' Association said the retail banking market is open and competitive. "The OFT's market study contains many good points but some of its numbers are difficult to rationalise as they use assumptions and averages and importantly, do not recognise the costs of providing the services," it said.
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