Royal Bank of Scotland (RBS), which is 70% owned by the Government, has slashed its overdraft charges – ahead of the decision by the Supreme Court over whether or not the Office of Fair Trading (OFT) can regulate these charges.
The changes, which come into effect on October 1, will also affect NatWest customers and will see the cost of a bounced cheque or an unpaid direct debit reduced to £5 from £38, while the fee for paying an item on an overdrawn account will be slashed by half to £15.
Newly-appointed chief executive of the bank’s UK operations, Brian Hartzer, said: “This is good news for customers, not least because the fees for unarranged borrowing have been an area of ongoing concern for them,”
“As we look ahead there are many issues to consider, but we thought it was time to move this particular customer concern forward by cutting our charges.”
“As it relates to past charges we are awaiting the outcome of the industry-wide bank charges test case,” adds Mr Hartzer.
However, Peter Vicary-Smith, of Which? consumer group said the bank has bowed to consumer pressure, an accusation the bank denies.
“If RBS and NatWest truly want to get back in their customers’ good books, they should admit defeat in the bank charges test case and repay the millions of pounds Which? believes they’ve been unfairly taking from their current account holders for years,” said Mr Vicary-Smith.
Meanwhile, Nick Spooner of the campaign group, Legal Beagles, expects other banks to follow suit.
Last year, a High Court test case that has now been running for two years ruled that the OFT had the right to decide whether or not the charges were fair.
However, the seven High Street banks involved in the case challenged the ruling and in April were granted the right to appeal to the House of Lords.
It is estimated that banks could be forced to refund up to £1 billion in charges if they lose the fight with the OFT and face losing more than £2.5 billion a year in lost revenue.