Businesses suffering under harsh bank charges
Banks have been charging businesses increasingly larger amounts for unauthorized overdraft withdrawals, according to a new report.
Financial data company Moneyfacts has released a statement criticizing the banks’ increased charges. In 2002 the Competition Commission launched an investigation into the banks’ small business services, particularly the ‘unfair’ charges for unauthorized overdraft extensions. Moneyfacts said that in the four years since the investigation there had been little sign of a reduction in charges.
The banks themselves said that the market was competitive, and that if businesses kept on top of their finances they would avoid paying the charges. Moneyfacts has provided examples of higher fees now charged by the banks since the investigation in 2002. Barclays now charge £30 instead of £12 for breaching an overdraft limit, and the Abbey has raised its fee from £15 to £30 per debit.
Lee Tillcock of Moneyfacts said: “Since the 2002 Competition Commission investigation into unfair business bank charges, there has been a marked increase in many unauthorised fees, and so far little evidence of what the investigation set out to achieve.” Earlier this year, the Office of Fair Trading carried out a review of how the banks had been behaving since the Competition Commission published their report. Their findings are expected to be published early next year.
Mr Tillcock said: “The OFT has stated that, in the future, charges should only reflect the administrative costs of dealing with the default. “Unauthorised overdraft charges must only cover associated costs and not, for instance, be used as a method of financing other less profitable products and services. “The best advice for any small business facing financial difficulty or cash flow problems is to speak with its business manager as soon as possible, before things get out of hand. After all, this is supposedly a service included within their banking charges.”