A crackdown on current account penalty charges could slash the cost of banking for millions of customers. The Office of Fair Trading is telling banks and building societies they must follow guidelines on excessive charging for some services or face a formal investigation. This follows the OFT’s ruling that penalty charges of up to £25 on credit card customers who pay bills late or exceeded credit limits were unfair and excessive.

It now wants banks and building societies to look at other charges and ensure that they reflect the amount of work and time incurred in dealing with the customer. Coming under the spotlight in particular will be fees for exceeding authorised overdraft limits and for bounced cheques and direct debits which can cost £30 or more for each mistake. An OFT spokesman says: ‘We believe that the same principles as those on credit cards should be implemented on all products. They should be cost effective and not be cross-subsidising.

‘There is not an investigation at the moment, but we are looking at the situation. We would rather they take on board the guidance from us and the results of court cases and change their ways.’ An increasing number of account-holders have begun to take banks to court over what they consider to be excessive penalties. A frequent gripe occurs when loyal long- standing customers are fined for slipping into the red for as little as a few hours. Lloyds TSB and HSBC both offer some reprieve from these charges. Lloyds will waive the £30 excess overdraft fee if it is the first time you have slipped into the red that year. It will also only charge you a maximum of £90 in fees that month. Its fee for bounced cheques or direct debits is £35.

HSBC will not charge for the first time you go overdrawn in six months or if the total owed is less than £10. Otherwise it will charge £25 and £30 for bounced payments.

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