The Times - Standards watchdog to probe overdraft fees

Office of Fair Trading is to investigate overdraft charges as it widens its probe into personal current accounts.

The Office of Fair Trading is to broaden its planned investigation of the personal current accounts market to include penalty charges for unauthorised overdrafts.

The OFT also said it could force banks to charge customers for their current accounts. It fears free accounts encourage banks to make money from hidden fees such as overdraft penalties.

The watchdog said it would consider charges levied by banks against those who go into the red without prior permission. It fears the accounts act as a "gateway" to more profitable products, making it difficult for customers to determine the how much they pay for basic services.

Details of the study, announced in March, come as a newly qualified barrister proceeds with his case against NatWest over excessive charges. Tom Brennan is seeking damages from the bank after running up penalty charges of £38 for each lapse. He claims the charges were unlawful because, by his estimate, it costs the bank £2.50 to cover the cost of a customer breaching their overdraft limit.

John Fingleton, chief executive of the OFT, said: "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." He also said the investigation would focus on transparency of charges. He has previously raised the possibility that banks should be forced to make up-front charges for current accounts in return for the removal of hidden charges.

The OFT's investigation comes after the Competition Commission investigated the banking market in Northern Ireland. It concluded that banks there have "unduly complex charging structures and practices". The OFT believes the same issues are likely to be relevant in the UK.

Last April the OFT ruled penalty charges for overdrafts and credit cards were unlawful.

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