The Office of Fair Trading (OFT) is stepping up its scrutiny of the retail banking sector with the announcement today (26 April) of a market study into current account charges.
The market study runs alongside an inquiry into the banking sector, the scope of which the OFT said it would widen on 30 March. The original inquiry was launched last September into charges such as penalties on exceeding overdrafts.
The major banks had already turned to their longstanding counsel before today’s announcement: Barclays instructed Clifford Chance, Lloyds TSB is being advised by Lovells, Royal Bank of Scotland (RBS) has instructed Ashurst and Linklaters, while HSBC is looking to Freshfields Bruckhaus Deringer.
The market study announced today will examine whether or not the defence by banks – that customers in the UK enjoy free banking only because banks can recoup their costs only through avoidable penalties – is legitimate.
The regulator will also examine whether allowing the end of free banking would increase competitiveness among banks.
OFT chief executive John Fingleton said: “This market study will enable the OFT to consider wider questions about transparency and value in the provision of personal current accounts. This will provide the necessary context for assessing the fairness of unauthorised overdraft and returned item charge before we apply the law in this area.”