Banks accused of baffling overdraft charges

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 group, 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.

The research also found that customers could be paying over twice as much a month for an unauthorised overdraft at one bank compared to another.

It would cost a customer five times as much to make a payment from an account overdrawn for two days in a row in a month at building society Nationwide (£50) as it did with Halifax (£10).

The highest fees for current account unauthorised overdrafts were found at First Direct and HSBC, which both charged £150 a month. At Barclays, the same overdraft cost £66.

Which? also accused banks of using expensive daily fees for unauthorised overdrafts, with RBS charging £6 a day, or the equivalent of 2,190% annual percentage rate, when its clients go £100 into the red without authorisation.