Leeds MP Rachel Reeves calls for action on bank charges

Rachel ReevesRachel Reeves
Rachel Reeves
CUSTOMERS SHOULD be protected from excessive overdraft charges by the financial services regulator, according to a leading MP.

Former shadow work and pensions secretary Rachel Reeves claimed letters from leading banks detailing their charges showed they were too confusing for customers to have any hope of finding the best deal.

Earlier this year the Competition and Markets Authority told banks they would have to publish their monthly maximum charge for unauthorised overdrafts but stopped short of imposing an insustry-wide cap.

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Other measures included banks upgrading their IT systems so price comparison websites can help customers choose the best account.

Amid concern from MPs that the CMA’s report did not go far enough the Treasury Select Committee asked the banks to set out details of the charges they impose.

The responses revealed the wide ranges of charges and interest rates imposed by each bank on different accounts with HSBC’s letter alone running to eight pages.

Ms Reeves, the Leeds West MP and a member of the committee, called for the Financial Conduct Authority (FCA) to intervene.

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She said: “The report from the CMA last month was a missed opportunity, and did not go nearly far enough to tackle excessive overdraft charges.

“What these responses from the banks now show is just how complex and confusing the charge structures are for overdrafts – customers don’t stand a chance of being able to identify the best deal.

“The ball is now firmly in the FCA’s court. It must step up to the challenge and take necessary action, for example by imposing a monthly maximum charge on overdrafts, to ensure that those who are most financially vulnerable are protected.”

The banks’ letters followed a request from committee chairman Andrew Tyrie.

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He said: “Some customers are being charged very high rates for using their overdrafts, both arranged and unarranged. Charges can also be very complex.

“The recent CMA report found that many customers often aren’t even aware of how frequently, or for how long, they are using their overdrafts.

“The CMA’s proposed remedies, which include a self-regulated Maximum Monthly Charge, don’t appear robust enough to deal with this serious problem.

“Better competition can bring choice and better results for customers.

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“This can only happen if consumers know what they are being charged, which they don’t at the moment.”

The CMA found that customers with overdrafts could save an average of £153 by switching their bank account.

But campaigners and smaller banks have called for more radical action, including the break up of the so-called ‘Big Four’ to encourage greater competition.

A British Bankers Association spokesman said: “Across the board overdraft charges have plummeted with customers saving nearly £1 billion a year, and a number of products now offer a fee and interest free facility within an approved overdraft limit.

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“Banks are helping customers compare account charges in a variety of ways, from making charges easier to understand to providing useful online calculators and mobile apps.

“They also itemise charges on bank statements and use text alerts to communicate important account information instantly.”