press release

HIGHLY respected financial services commentator ANDREW HAGGER has joined leading data comparison site Moneynet.co.uk.

Formerly head of news and press for Moneyfacts.co.uk, Hagger has built a formidable media reputation within the industry for his incisive reporting on new products, legislative developments and all aspects of personal finance affecting consumers.

THE BANKS’ success today in winning the right to appeal against the challenge to high penalty charges could result in the masses being saved from being penalised for the behaviour of the few, according to data comparison site Moneynet.co.uk.

Every current account holder in the UK could face paying up to £100 a year* in fees to compensate banks for annual losses of £3bn should the highly unpopular punitive penalty charges be abolished.

Following the support given to the Office of Fair Trading by the High Court to challenge the banks’ practice of punishing customers who stray into unauthorised overdrafts, the negative impact on the UK’s 50 million account holders from the displacement of the income generated for the banks could be significant.

Should the banks be forced to pay back up to six years’ worth of unfair charges to all those who are eligible to claim, the potential loss of income is £18 billion, plus £3bn per year moving forward.

“Whilst April’s ruling was great news for those who have suffered from these charges for breaching their account terms, it wasn’t such good news for the majority of bank customers who have managed, by whatever means, to avoid these charges,” says Moneynet.co.uk’s Richard Brown.

“Not surprisingly, the banks are refusing to swallow this loss of revenue without fighting back,” he says. “Put simply, we will see the end of free banking which means everyone will end up paying for others lack of ability to control their finances.

Twenty years ago, in the days before free banking, penalty charges were considerably less. The demise of one leads inevitably to the inflated value of the other.

The introduction of fee structures similar to those used by the banking systems in the United States, Australia and much of Europe would mean consumers having to pay annual fees and possibly charges for each debit card transaction – costs which can really stack up unless consumers radically change their habits.

“However, two things will help to mitigate the banks’ losses,” says Brown. “Firstly, not everyone will bother to claim and secondly, it’s not realistic to suppose that the banks won’t be allowed to charge anything for administering these accounts.

“It’s likely that the OFT, if successful, would rule that the banks can charge £10 to £12 per ‘offence’ which will curtail their losses to the region of two thirds of their previous income.

But in the interests of fairness – which is what this exercise is all about – the OFT should be mindful of limiting the far-reaching effects of this campaign on those who do not deserve to lose out.”

* BBA/BSA data, April 2007