RBS and Natwest slash overdraft fees in shock move.

RBS and Natwest have announced fees for unarranged borrowing will be dramatically slashed ahead of the impending decision from the Supreme Court on whether or not the Office of Fair Trading (OFT) can regulate these charges.

The cuts, which will be effective from 1 October, will see the fee for returning a cheque, direct debit or standing order reduced to just £5 from £38, and the fee for paying an item when overdrawn cut by half to £15 per day.

Brian Hartzer, CEO of the Combined Retail Bank, 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.”

The contentious issue of bank charges has been raging for the last four years as hundreds of thousands of customers have endeavoured to reclaim their charges on the basis that they were unfair and therefore illegal.

The House of Lords is currently investigating the issue over whether fairness does apply to the charges and is expected to give a decision in the next few weeks. It is estimated that approximately £1 billion has been paid out to victims before a hold was put in place as the case is heard.

Martin Lewis, creator of MoneySavingExpert.com, commented: “This is welcome news. Anything that lowers fees is a good thing. But there are three different ways of looking at this.

“Firstly, these are Government-owned banks which are under political pressure to reduce fees in what is becoming a political hot potato.

“Secondly, it could be an acceptance that defeat is coming in the test case so RBS and Natwest are trying to become the first banks to get in on the act.

“The third view, and the most cynical, is that banks can see the writing is on the wall and by saying they have fixed the problem they could be trying to negate any moves to regulate the system and avoid retrospective payouts.”