www.ftadviser.com/2012/08/21/ifa-industr...TpubyaJ/article.html
Banks could be forced by the regulator to introduce charges for basic current accounts in a move aimed at halting the practice of subsidising ‘free’ banking through the use of excessive charges for certain services or mass sales of products such as PPI, according to consumer watchdog Which?.
In a report that claims to debunk the myth that banking is currently free, the research organisation claims a senior executive at the Financial Services Authority has stated that regulatory intervention might be needed to instruct banks to charge for current accounts.
This follows comments made by Lord Turner last month during a speech in London, in which he said that free-if-in-credit banking stifled competition and presented a high barrier to entry into the sector.
Which? has argued that any agreement by banks to start imposing a monthly fee would breach competition law and there should be strict penalties against such collusion. It adds in its report that it would be a “disgrace” if taxpayers “who bailed out the banks” are now forced to pay for basic accounts.
Instead, Which? calls for fundamental changes to the culture and practices of the banks to force greater transparency over the true costs of banking.
The report highlights the example of charges for going overdrawn for two days per month without authorisation, which it says range from £120 to £900 per year.
Even customers with authorised overdrafts will rack up significant charges as many banks, including RBS/Natwest and HSBC, charge an annual percentage rate of 19.9 per cent - higher than many credit cards and personal loans.
First Trust Bank’s Classic Account charges the most for an authorised overdraft at £185 per year, Which? reveals.
Consumers who stay in credit are also being hit through lost interest and hefty fees for withdrawing and spending cash abroad, according to the report.
Under these circumstances, Natwest Select and Lloyds TSB ‘classic account’ customers who stay in credit with an average balance of £1,500 would lose out on £63 a year.
Which? calls for the incoming conduct regulator, the Financial Conduct Authority, to clamp down on high or complex overdraft charges.
Peter Vicary-Smith, Which? chief executive, said: “The suggestion that banks should increase charges to avoid more scandals defies logic and is a slap in the face for consumers who are being hit hard by one of the worst financial crises in recent times.
“It’s a disgrace that the very people are being asked to pay more for the most basic accounts, while the industry continues to be rocked by scandals like PPI mis-selling, Libor rate-rigging and IT failures.
“Banks must be far more transparent about their fees and charges so that people can clearly see what they already pay.”
