OFT To Investigate “Free†Banking
While many consumer groups have welcomed the Office Of Fair Trading’s (OFT) investigation into the banking sector, and the supposed “free†banking offered to all private customers, others believe it is playing into the hands of the industry. It has long been common knowledge that banks use certain areas of their business to subsidise others, e.g. low interest rates on current accounts can often subsidise “free†banking.
The OFT are very keen to see the actual breakdown of these subsidies and how they effect the consumer. There are concerns that while this “shuffling†of money does happen, consumers are not sure exactly what they are “paying†to obtain “free†banking. In a strange twist to this consumer led investigation, the OFT may actually herald the end of “free†banking, prompting banks to charge more transparent charges to customers.
While this possible change in the charging structure may surprise many, the OFT are very concerned about the so called “water bed “ effect whereby banks are able to increase other charges to offset charges which are deemed illegal or too high, e.g. the overdraft charges currently being investigated. There have been signs of this of late, with credit card interest rates increasing faster than the actual base rate.
This investigation will run aside the OFT’s ongoing look at bank overdraft charges, and in particular where they stand with regards to the masses of charges being reclaimed by consumers. Quite how these investigations will eventual effect the future structure of banking remains to be seen, but it may end up as an early Christmas present for the banking industry.
You must be logged in to post a comment.