From: Robin T Cox 
Subject: Banks are accused of overdraft fee racket
Newsgroups: uk.finance
Date: Thu, 14 Jun 2007 20:30:17 GMT
Bytes: 4416

Banks are accused of overdraft fee racket

By Harry Wallop, Consumer Affairs Correspondent 
Telegraph online
Last Updated: 2:18am BST
14/06/2007

http://www.telegraph.co.uk/news/main.jhtml?xml=/news/2007/06/14/nbank114.xml

High street banks have raked in £2 million a week by increasing their
overdraft rates, it was claimed yesterday.

This is the latest accusation that banks are taking advantage of higher
interest rates to make undue profits.

Last week The Daily Telegraph revealed that banks had made £750 million by
cutting interest rates on current accounts. advertisement

The latest research, from uSwitch, the price comparison website, shows
that overdraft rates have increased much faster than interest rates, which
are set by the Bank of England.

The base rate has risen by 0.5 per cent but the top nine banks have
increased authorised overdraft charges by an average of 0.93 per cent, the
website claims.

Lloyds TSB has increased overdraft rates by up to 3.1 per cent. HSBC has
put up its charges by two per cent.

The same banks have increased rates for customers staying in credit by a
tiny amount.

Over the past six months uSwitch claims that leading banks and building
societies have generated additional revenue of more than £52 million by
increasing authorised overdraft rates.

This research will provide ammunition for nearly three million people who
are trying to reclaim "unfair" bank charges. Some have had to pay £38 for
exceeding their overdraft limit.

Banks tend to pay out rather than go to court. But campaigners fear that
they are merely increasing charges to recoup this lost income.

Mike Naylor, the personal finance expert at uSwitch.com, said: "In
anticipation of the Office of Fair Trading's ongoing investigation into
current account default charges, many banks are already putting measures
in place to recoup the revenue they may lose if fees are capped."

HSBC is the latest bank to increase its rates, which average two per cent
depending on the type of current account.

Lloyds TSB has also increased authorised overdraft rates for its 7.8
million current account customers by up to 3.1 per cent in nine months, to
an average of 16.1 per cent.

Lloyds TSB has about a quarter of the UK's current account market, which
means that these increases will generate an extra £23 million in the next
year, since 2.7 million of their customers are regularly overdrawn.

Over the same period Lloyds TSB has increased its credit interest rates on
current accounts by an average of just 0.12 per cent.

Mr Naylor added: "We would recommend that consumers keep a very close eye
on the interest rates on their current account and look to move from banks
that start making changes."

Bank customers in the UK are getting a raw deal in terms of service
compared with some of their European counterparts, a report claims.

A study of banks in 17 countries found that British consumers have to put
up with long queues in branches and limited customer information.

Those using call centres found it difficult to be connected to an adviser.

The study, by consultancy firm Booz Allen, used mystery shoppers to look
at the experience of customers using branches, call centres, online
services and other banking facilities.

Britain came fifth in Europe, placing it below Germany, Spain, Switzerland
and Austria. Hong Kong was the strongest overall.