OFT to challenge overdraft fees

The UK’s Office of Fair Trading (OFT) has announced that it is to look at default fees levied on bank current accounts to determine whether existing fees are too high.  This follows on from a recently completed review of default charges applied to credit cards, which resulted in issuers reducing charges significantly.  At that time, the OFT made clear that it felt the relevant provisions of the Unfair Consumer Contracts Terms regulations applied equally to other consumer products, including current account; something the industry contests.

In the course of this work the OFT will liaise closely with the Financial Services Authority (FSA) and hold discussions with the British Bankers' Association (BBA) to ensure that distinctive features of retail banking and the circumstances in which default charges are applied are identified and taken into account. This fact-finding exercise is expected to take between three to six months, at which stage the OFT will consider whether a further detailed investigation of the fairness of individual bank default charges is needed.

Frontier (London) is helping HSBC with this process.

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