It's no secret that banks make a stackload of money, out of us, every day, through penalty charges.
Now, the true extent of their money making ways has been revealed as it has been claimed that the the UK's major banks make £2.5 billion a year in profit through unauthorised overdraft charges.
The Office of Fair Trading (OFT) is is expected to reveal this exorbitant figure later this month when it publishes its market study into current accounts and unauthorised penalty charges.
The study follows the OFT's recent High Court victory on the issue of unauthorised penalty charges, which paves the way for a second hearing to decide whether the penalty charges are unfair and if so, what a fair charge should be.
However, the banks have appealed against the judgment, and the second hearing will be delayed until this is concluded.
The OFT is expected to say in its market study that the eight banks involved in the court action made £2.5 billion through unauthorised overdraft charges in 2006. It had previously been estimated that banks made between £2 billion and £3.5 billion a year through the charges. The report will also reveal that the average daily overdraft balances were £600 million during the year.
Claim back your bank penalty charges
The OFT is also expected to say what a reasonable charge for the service would be, as well as looking at how transparent the charges are (we think not very) and how easy it is for us to switch banks if we want to.
The OFT did confirm it was publishing a report later this month but would not be drawn on its contents.
Unauthorised penalty charges can be as high as £39 for a single bounced payment, although penalty charge campaigners claim the admin cost to the banks could be as little as £2.50. So far, only Barclays have reduced the costs of their penalty charges.
Annual results for the major high street banks show they have so far paid out more over £559 million in penalty charge refunds to those of us who have complained about unauthorised overdraft charges.
The actual total will be higher as both Abbey and Nationwide Building Society are unwilling to reveal just how much they have refunded (which probably means they have paid out a lot).
If you have put your claim for penalty charges on hold, then you are playing into the hands of your bank. The risk is that the banks will rely on the 6 year contractual limitation period.
What this means is that over 6 years, every day you wait is another day you lose and another day the banks win.
So, time is money; don't delay in submitting your claim for unfair bank charges!
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