April 25 2014 Latest news:

Even maths boffins struggle to understand how unauthorised overdraft charges work, with complex fee structures making it virtually impossible for customers to calculate how much they are going to be charged by their banks.

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That’s the verdict of consumer group Which?, after it asked a group of volunteers to work out how much they would be charged in a number of scenarios.

Despite one of the Which? volunteers being a maths PhD student, none of them got all the calculations right. Between them, they managed to get only seven out of 48 charges correct between them.

Which? said there were numerous complex rules and additional fees on top of overdraft charges. It said Lloyds TSB’s fees were particularly confusing, with three different types of fees in addition to charging interest on unplanned overdrafts.

The research also found that customers at one institution can pay much more for unauthorised overdrafts than those at another. For example, Nationwide charged the highest fees – £50 – for customers making one payment from their accounts while being overdrawn for two days in a row in a month. The equivalent fees at Halifax were £10.

Which? said it wanted the Financial Conduct Authority, the new regulator due to be in place later this year, to look at stopping unfair overdraft charges.

“While the government has previously announced reforms to tackle unfair overdraft charges, they simply don’t go far enough,” said Which? chief executive Peter Vicary-Smith.

“It’s extremely disappointing to find that bank charges are still too high, too complex and impossible to compare.

“It’s essential that the government gives the new financial regulator the powers to limit these charges and to challenge their complexity.

“We want to see the new regulator put consumer protection at the heart of everything it does. The regulator must be a strong, open and proactive watchdog that stands up to the banks, not a lapdog.”

The British Bankers’ Association, the industry’s trade body, made the point that unauthorised charges would not be applied to any accounts kept in credit or within agreed overdraft limits.

“Most customers don’t go into an unauthorised overdraft,” a spokesman said.

“Those who do so regularly should consider asking for an overdraft limit or review the way they operate their account.

“Whichever way you operate your account it’s important to shop around for the best deal that suits you. The major banks all provide six common charging scenarios on their websites to allow customers to see what charges they may incur if they were customers of that bank. They can then compare the relative costs between different banks.”

The Which? research found that many banks used expensive daily fees. RBS charged £6 a day, equivalent to annual interest of 2,190pc, on a £100 unauthorised overdraft. This is the sort of rate charged by payday loan companies that made the headlines in the run-up to Christmas.

The BBA spokesman said: “The major banks recently announced a package of initiatives designed to introduce more transparency.

“These include text alerts if the account is getting close to an agreed limit; ‘wiggle’ room so that the customer won’t be charged if they accidentally slip into the red by a small amount; and clearer information about when charges will be debited to the account and the point by which time during the day funds have to be paid into the account in order to avoid charges.

“Customers will also be able to opt out of overdraft facilities completely so that the account can’t go overdrawn at all.”

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