The Office of Fair Trading has recently declared that the practice of banks and credit card companies charging extortionate late payment and overdraft fees as 'illegal' and ruled that the banks must cap their future charges at £12.
But whilst this may seem like a victory for the consumer it may not be, as banks are likely to compensate for the loss of profits by charging customers in other ways.
But whilst this may seem like a victory for the consumer it may not be, as banks are likely to compensate for the loss of profits by charging customers in other ways.
Last Thursday (06/04/06), the Office of Fair Trading (O.F.T.) declared that the practice of British banks and credit card companies charging large late-payment and overdraft fees as 'illegal'.
The report came after campaigning from pressure groups, including the consumer association Which? to drop the excessive charges.
Typical charges are around £20, but the O.F.T. has stated that in the future all banks must comply to a maximum fine of £12, so that the fee only reflects the real cost to the bank in administration costs.
The banks have until May 31st to respond to the O.F.T's statement, and they may face penalties if they do not implement the capped fines.
However, many industry experts believe that banks may introduce other charges, such as membership fees, in order to make up in the loss of profits that capped fines would bring, and some insiders have warned that this may lead to the end of free banking.
What is so shocking about this is that these further charges are even a possibility.
Yes, banks will face a loss in profits, as charges account for as much as 5% of income of the major banks.
But in an industry that is recording record profits, surely it is only right to charge customers openly and fairly.
Hopefully at least one major bank will make the bold decision to not introduce other charges as this is likely to lead to other banks following or finding that their customers will be switching their accounts.
The report came after campaigning from pressure groups, including the consumer association Which? to drop the excessive charges.
Typical charges are around £20, but the O.F.T. has stated that in the future all banks must comply to a maximum fine of £12, so that the fee only reflects the real cost to the bank in administration costs.
The banks have until May 31st to respond to the O.F.T's statement, and they may face penalties if they do not implement the capped fines.
However, many industry experts believe that banks may introduce other charges, such as membership fees, in order to make up in the loss of profits that capped fines would bring, and some insiders have warned that this may lead to the end of free banking.
What is so shocking about this is that these further charges are even a possibility.
Yes, banks will face a loss in profits, as charges account for as much as 5% of income of the major banks.
But in an industry that is recording record profits, surely it is only right to charge customers openly and fairly.
Hopefully at least one major bank will make the bold decision to not introduce other charges as this is likely to lead to other banks following or finding that their customers will be switching their accounts.
No comments:
Post a Comment