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May 12, 2008

Nationwide raises Flex account overdraft rate

by Gill Montia

Story link: Nationwide raises Flex account overdraft rate

From the 1st June, Nationwide is raising the overdraft interest rate for its four million Flex account customers by 3%, to 12.45%.

The building society is also reducing the interest paid on credit balances from a maximum of 3.75%, to 3.5% while extending the limit for customers who qualify for its best credit-balance interest rates from £1,000 to £1,500.

Other banks and building societies are expected to take similar action; Royal Bank of Scotland and its NatWest subsidiary have already increased fees on some current accounts by up to 16%.

Some experts see the higher charges as connected to the recent High Court ruling in the long-running battle over the unreasonable charges made by High Street banks for unauthorised overdrafts and bounced cheques.

While a final judgement in the case is still awaited, last month Mr Justice Andrew Smith ruled that the Office of Fair Trading could assess the terms and conditions that allow the banks to charge the fees under the Unfair Terms in Consumer Contracts Regulations.

This does not bode well for the banks, which have been brought one step closer to having to reimburse tens of thousands of customers who are claiming unfair treatment.

The banks have always argued that the fees charged for unauthorised overdrafts subsidise the free banking services they provide.


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