Banks unfair to customers who exceed overdraft
CONSUMERS who end up overdrawn on their bank accounts are being treated unfairly -- but regulators have no plans to fine the lenders.
Instead, the Central Bank has directed a number of banks to cease treating customers poorly when it comes to charges on current accounts.
Most of the consumers who have had unfair overdraft charges imposed on them are struggling financially.
An inspection of 300 current accounts across five banks by the Central Bank found problems with the way charges were applied to accounts where the approved overdraft amount was exceeded.
Banks offering current accounts are: AIB, Bank of Ireland, Permanent TSB, Ulster Bank and National Irish Banks.
The Central Bank would not say which banks it inspected.
The probe found that consumers were being treated badly when they went over their agreed overdraft limit.
Regulators said they had no plans to fine the offending banks as they had kept to the letter of the law.
But director of consumer protection with the Central Bank Bernard Sheridan said he was concerned about the way banks were imposing what he called "out-of-order" charges.
Banks were found to be imposing two types of fees at the same time, when people go over their agreed overdraft limit.
The banks were accused of being too ready to impose unpaid item fees, where the bank charges up to €10 if a cheque or a standing order has to be returned unpaid.
And they showed a readiness also to impose referral fees.
These are applied to each transaction which causes the account to exceed the overdraft limit. The referral fee can be as high as €5 for each transaction when an account is outside its overdraft limit.
Surcharge interest, of up to 12pc, is also applied when someone goes beyond their overdraft limit.
Banks were found to be imposing both unpaid item fees and referral fees at the same time.
The banks were not found to be acting illegally or to have overcharged their customers -- as their actions were covered in the small print in current account terms and conditions.
But Mr Sheridan said he was not happy with the way some banks were applying the charges and had told the banks concerned to change their practices.
Mr Sheridan said: "It is important that consumers keep an eye on their bank accounts and take steps to avoid such charges where possible."