Banks back down on charges

Double-charges could have cost £2.50 to withdraw £10

Britain's banks have voted unanimously in favour of introducing a system to ensure customers are not charged twice for withdrawing money from a cash machine.

It will now be for banks and building societies to explain fully to their customers the charging policy they intend to adopt.

Stephen Byers, Trade and Industry Secretary

The vote was taken at a meeting in Harrogate of the 34 members of Link, the UK cash machine network, and becomes effective on 1 July.

The decision lifts the threat of double-charging, which is when the customer's own bank charges a "disloyalty fee" and the bank owning the cash machine also levies a "surcharge".

The banks must now decide whether they want to impose surcharges on non-customers.

Some Link members, such as the Yorkshire Building Society, have already made it clear they will not.

On-screen warning

Those that do want to charge will have to ensure that they notify customers on-screen at the machine before any transaction takes place.

We shall ensure that there is genuine competition in this area so that customers have a genuine choice.

Stephen Byers

The decision relates to an earlier vote by Link members in favour of letting banks such as Barclays charge non-customers directly for using their machines.

If those non-customers were already charged a £1.50 disloyalty fee by their own banks, they could have been charged up to £2.50 for taking out just £10.

The banks have now resolved to prevent that happening, but the competition authorities are still worried about the level of charges.

Even a single fee of £1 is more than three times the cost of a cash machine transaction, and the banks would be hard-pressed to justify anything higher than 30p.

Unbelievable

Link had promised to hold the vote earlier this month at a meeting with the Trade and Industry Secretary, Stephen Byers, who had written to Link saying he could "scarcely believe" some customers might be double-charged.

After Link's new decision, Mr Byers said: "Ruling out double-charging is a step in the right direction, but the banks and building societies need to go further if they are to meet the concerns of their customers.

"Some banks and building societies have already indicated that they do not propose to impose any charges at all," he said.

"It will now be for banks and building societies to explain fully to their customers the charging policy they intend to adopt.

"We shall ensure that there is genuine competition in this area so that customers have a genuine choice."

Cruickshank report

In a damning 400-page report, the head of the government's inquiry into banking, Don Cruickshank, recently called the cash machine system "inefficient, anti-competitive and socially exclusive".

He said there was an "overwhelming case for change".

Mr Cruickshank pointed out that the real cost of a cash machine transaction - including the cost of installing and running the machines - was between 15p and 30p, meaning banks were making profits, even on a single charge, of 200-300%.

Mr Cruickshank called for the government to bring in new laws to regulate the cash machine network, together with credit cards, cheque-clearing and money transmission.

Monopoly

He also described as a monopoly the entire payments system, which is dominated by the big four of Barclays, Lloyds TSB, HSBC and RBS/NatWest.

Since the report was published, Mr Byers has referred the big four to the Competition Commission over their services to small businesses, where between them they hold 83% of the market.

In the Budget, Chancellor Gordon Brown said the government would legislate for greater competition in the money transmission system, in line with Mr Cruickshank's recommendation.