Overdraft fees fuel watchdog concerns – Telegraph

[Legal Beagles]

Bank overdraft charges have jumped in the last year in a development likely to raise concerns at the competition regulator as it considers tackling the dominance of the major high street banks. Consumers pay £3bn a year in overdraft fees and are often baffled by complex charging structures that make it difficult to compare prices, […]

More...

[leclerc]

Re: Overdraft fees fuel watchdog concerns – Telegraph

Bank overdraft charges have jumped in the last year in a development likely to raise concerns at the competition regulator as it considers tackling the dominance of the major high street banks.

Consumers pay £3bn a year in overdraft fees and are often baffled by complex charging structures that make it difficult to compare prices, according to Alex Chisholm, the head of the Competition and Markets Authority.

Average overdraft rates paid by consumers have risen by 11pc in the past year, and above 10pc in October for the first time since 2012, figures from the Bank of England show. This is despite savings and other borrowing rates falling amid record low funding costs for banks.

The cost of an unsecured loan, for example, has fallen by 5pc, while interest rates on mortgages and savings are at record lows.

Recent rises in overdraft charges could well serve as evidence that consumers are perplexed by hidden fees and teaser rates from banks, making them less sensitive to pricing.

Related Articles

• 
  
• Overdraft fees 'impossible' to calculate
  17 Jan 2014
• Barclays reviews overdraft fees and charges
  22 Sep 2013
• FCA queries if 'overdrafts pay for free banking'
  10 Apr 2014

Around 25m people have an overdraft, and the associated cost has been identified as one of the key problems in the retail banking market by the CMA, which is investigating the major banks over concerns that their grip on the market harms consumers.
One of the potential remedies the watchdog can order is a break-up of the biggest lenders, an option favoured by the Labour leader Ed Miliband.
Mr Chisholm said overdraft charges were one example of how consumers pay large amounts for supposedly “free” current accounts.
“There’s no such thing as free banking. People may have a perception but in reality you’re paying for those services,” he said.
“It’s one of the things I expect [the review] to look at.”
Last month, the CMA said it would launch a full-blown investigation into the banking sector after saying that the anaemic levels of switching in the market suggest that the market is not competitive.
The regulator can order changes to overdraft fees or force them to be more transparent about charges, but in more extreme scenarios, it can order banks to sell off branches.
The review is expected to reveal initial recommendations next September and publish a full report in May 2016.