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Watchdog probes cost of banking Watchdog probes cost of banking
(about 1 hour later)
The Office of Fair Trading (OFT) has launched a wide-ranging study into the charges banks impose on customers.The Office of Fair Trading (OFT) has launched a wide-ranging study into the charges banks impose on customers.
Experts claim the latest probe could mean the end of the so-called "free" personal bank account. It could lead to recommendations that banks charge their customers annual fees - an end to "free banking."
The OFT claims that the idea of free banking is a myth and that people have no idea how much they pay for services. The OFT says people currently have no idea how much they are really paying for their banking services.
The wider study will run alongside its ongoing investigation into the charges levied by banks for unauthorised overdrafts and bounced cheques. This wider study will run alongside its continuing investigation into the banks' charges for unauthorised overdrafts and bounced cheques.
The watchdog said it would examine charges in the "context of efficiency, transparency, value and consumer choice". "We want greater transparency in what you get and what the charges are," said an OFT spokeswoman.
"This will be the most wide-ranging study into personal banking to date," the OFT said. "This will be the most wide-ranging study into personal banking to date."
"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.," said OFT chief executive John Fingleton. Overdraft charges
The OFT last month started a formal investigation into the level of charges that banks impose when customers go overdrawn without permission.
That followed a similar six-month informal investigation, brought about by concerns that overdraft charges and the fees banks charge for cheques which bounce were unjustifiably high.
The decision to look at the matter further led to widespread accusations that the OFT was letting the banks off the hook, having forced credit card operators to cut their default fees to £12 in 2006.
However, the OFT says its is concerned that if banks are forced to reduce their charges in one area then they will simply raise them in others.
To avoid any consequences of this so-called "waterbed" effect, it has now decided that the whole structure of personal banking in the UK should be scrutinised before it makes any recommendations.
The OFT aims to publish the preliminary conclusions of its latest wider study by the end of the year.
But it is clear that the two investigations are going to be closely linked.
"This will provide the necessary context for assessing the fairness of unauthorised overdraft and returned item charges before we apply the law in this area," said the OFT's chief executive John Fingleton.