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Sep 12, 2006
An analyst from
the Office of Fair Trading (OFT) has noted an increase in the overdraft market
rates following recent rise in savings and mortgage interest rates.
According to OFT’s
Lisa Taylor, it is unusual to see a significant change to overdraft rates
following a base rate change, especially as many of the changes are far in
excess of the 0.25% increase, with authorized overdraft rates rising by as much
as 2.5%. Taylor
thinks that the more likely cause could be linked to the threat of fee cuts to
be imposed by the OFT.
“While fees are a
hot topic, increases to overdraft rates may go unnoticed by many consumers. But
with many consumers reliant on an overdraft facility for their day-to-day
living, these small increases could add up to be a large revenue earner for the
banks,” Taylor
warns. “It should be an interesting area to watch as the OFTs investigation
unfolds over the next few months. With the banks already suffering lost revenue
from card default fees, rising bad debts and often relatively low profits from
their retail banking division, will another blow to their revenue, be one too
many? And will we, as many are speculating see the downfall of free banking?,” Taylor further speculates.
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