UK banks are charging customers up to GBP30 for services that cost them as little as GBP2.50 to handle, according to a study into bank costs by the BBC's Money Programme.
The study, undertaken by a three-person commission of two business academics and a former senior executive of NatWest, concluded that it costs banks no more than a maximum of GBP4.50 when a customer’s check bounces, and no more than GBP2.50 to bounce direct debits or deal with unauthorized overdrafts.
As the BBC points out, these costs are far below the average GBP30 penalty banks charge their customers for these defaults.
Banks are prohibited by law from charging more than process costs and, according to the BBC, the findings support campaigners’ complaints that the charges made by banks amount to penalties and are, in fact, illegal.
Thousands of people in Britain have, however, already successfully claimed compensation from their bank and, according to barrister Kieron Beal, of Matrix Chambers, the fact that banks are not contesting this, does suggest that perhaps they are finding it difficult to justify the charges that they impose upon their customers.
Angela Knight, chief executive designate of the British Bankers’ Association, defended the charges as service fees rather than penalties, telling the program: The legal opinion that the banks have had is that what they’re doing is entirely legal.
The findings have, however, have led industry experts to call on banks to justify the legality of the charges and, as a result of the program, the UK Office of Fair Trading (OFT) is now looking into the legitimacy of current account penalties.