Overdraft penalties 'too complex'

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Cash machineHigh street banks have been accused of using overdraft penalty charges so baffling not even a maths PhD student can work them out.

Which? asked a group of volunteers to compare how much eight different banks would charge if they exceeded their authorised overdraft limit. They found that a maths PhD student among the group struggled to work out the costs, with no one getting all the calculations right.

According to the consumer charity, unauthorised overdraft fees are so hard to calculate and compare because of a "myriad of complex rules and additional fees".

Peter Vicary-Smith, chief executive at Which?, said: "While the Government has previously announced reforms to tackle unfair overdraft charges, they simply don't go far enough.


"It's extremely disappointing to find that bank charges are still too high, too complex and impossible to compare."

The charity called for the Financial Conduct Authority, the new regulator expected to be in place by the end of the year, to put a stop to "unfair" overdraft charges.

It is not the first time the banks, which are currently under pressure from the authorities to curtail executive bonuses, have been questioned over additional overdraft fees.

In 2010, Business Secretary Vince Cable accused high street banks of "ripping off" their customers and failing to be transparent over the penalty charges.

NatWest was the bank with the best overall score (16 out of 24) when six members of the group were asked to find information about its overdraft charges online in less than four minutes, calculate the amount of interest and the fixed charges it levied, and work out the total cost of an unauthorised overdraft.

It was followed by Nationwide (14 out of 24), and Halifax (10 out of 24), while Santander (9 out of 24) and Lloyds TSB (8 out of 24) sat in mid-table. Banks that did the worst were HSBC and First Direct with 7 out of 24 each, and Barclays, which was bottom with 6 out of 24.

© 2012 Press Association

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