Banks using 112 'sneaky' charges to recoup lost fees

A study has identified 112 charges across key financial products such as credit cards, current accounts and mortgages.

Banks have been under pressure to cut the size of penalty fees and other charges imposed on consumers following allegations they are illegal and unfair.

Many have responded by introducing a host of smaller charges - meaning customers are still being stung for huge sums.

In the past a credit card customer might have been hit with a £25 fee for missing a payment deadline. But now they could receive two £12 charges under different headings instead.

The "Penalty Trap" is raking in more than £8billion a year for an industry which has recently announced record profits.

Researchers at moneysupermarket.com looked at the charges imposed by leading banks and building societies on mortgages, current accounts, savings, loans and credit cards.

A year ago consumers faced 110 penalties across these products from a group of high street giants. The figure has now risen to 112.

Managing director Stuart Glendinning said: "It is understandable that banks want to make up any profit lost by the clampdown on fees.

"But we are seeing sneaky tactics by some providers, who are renaming charges or introducing a new fee in their place - a practice-that doesn't treat customers fairly.

"Providers are giving with one hand and taking with the other."

The Office of Fair Trading has tried to tackle big charges on credit cards and current accounts, while the Financial Service Authority has capped mortgage exit fees.

But the finance giants have found new ways to protect their profits.

Credit card customers can be charged for not telling their bank in good time about a change of address, while some firms have introduced annual fees for customers who do not use their cards much.

Others have even started charging customers if they have a credit, rather than a debit, on their account.

Moneysupermarket experts found 51 penalty charges on mortgages, up from 46 last year.

The new fees include up to £75 to change the repayment method and up to £26 for not taking building insurance from the same provider.

Lenders have also raised mortgage application fees - sometimes to as much as £2,000 - after they were ordered to dump exit fees imposed when a customer moves to another lender.

The number of charges on loans remained steady at 11, while the figure on savings accounts remained the same at four. There was a slight fall on current accounts, with the number down from 32 to 27.

Mr Glendinning said: "It is galling that people are facing more penalties than last year, despite the OFT and FSA turning their attention to the issue.

"I am staggered that, despite intense media and regulatory attention, the majority of financial services providers are yet to make positive moves to reduce their charges.

"It is unbelievable that five financial products can be the root of so much penalty pain.

"With so many default fees and charges in place, even the most astute consumer can fall foul. People deserve financial penalties to be transparent and fair."

The British Bankers' Association has repeatedly insisted that charges and fees are already spelled out in marketing material and on websites.

The organisation has hinted that any further attacks on penalty fees will see the industry move to a system of annual fees on credit cards and current accounts - ending the British tradition of free banking.