Money
Paul Lewis on the web
Don't worry about free banking
Even if the banks lose the test case on overdraft charges that started this week they won’t start charging us for our current accounts, writes Paul Lewis
The fear has been raised since the Office of Fair Trading revealed that the banks collectively take £3.5 billion a year off those of us careless, foolish, or hard up enough to let our current account slip into the red.
If the courts find these charges unlawful, the argument goes, the banks will get the money back by imposing an annual charge of around £300 a year on every current account customer.
Imagine what would happen to the bank that jumps first. You can almost hear thestampede as millions of once loyal customers head for its competitors. It would make the queues outside Northern Rock last September look like a practice run.
And the days when they could all meet privately and agree to start charging at the same time are long gone. It would be illegal under competition rules. Ignoring those rules is a big risk.
Companies can now be fined up to 10% of their turnover for illegally agreeing to fix prices. Last month Asda, Safeway, Sainsbury and others were fined £116 million after they admitted fixing the price of milk and other dairy products.
That's not to say, of course, that the banks won't try to recoup the loss. They are under enough pressure already with the credit crunch and the high cost of borrowing off each other. But they all have their taking-money-off-customers-without-them-noticing departments and they will be set to work to find subtle ways to get more cash out of us.
They're very good at it. Just look at the delay in passing on to mortgage holders the full interest rate cut announced on December 9. Look at the 'administration' charges when you start a mortgage. They now average £876 a time – not bad for a fee which barely existed ten years ago.
So they will try to protect their £40 billion a year profit – around £12 billion of which is made from us customers. But not by anything quite as obvious as charging all of us £25 a month to run our current account.
And of course they might not lose the case. In which case it will be business as usual.
Don't expect a final judgement until very late in 2009.
