Alliance & Leicester customers who take the bank to the Small Claims Court to recover unfair bank charges are now being asked to take their business elsewhere.

Customers are increasingly aware that the level of charges levied by banks when overdrafts are exceeded, or payments returned, are considered unfair. The Office of Fair Trading (OFT) ruled in April that any charge over £12 would automatically be classed as unfair, warning banks and credit card companies that they could face legal action if they failed to comply.

Strong warnings from the Office of Fair Trading (OFT) have caused Barclaycard, HSBC and Lloyds TSB to reduce their credit card penalty charges by almost half.

On 5th April, the OFT announced that it considered the high penalty charges made by many credit card companies to be unfair and illegal. It warned companies that if they would be defending their charges in court if they didn't take swift action to bring the charges down to a maximum of £12. Penalty charges are made when a borrower misses a payment date or exceeds their credit limit, and should only be set to cover certain administrative costs.

Yesterday the BBC reported that Barclaycard, HSBC and Lloyds TSB had all reduced their penalty charges by almost half from £20 to the new £12 threshhold.

The Office of Fair Trading has finally gotten tough with credit card companies overcharging customers to the tune of £300 million per year through unfair and excessive default charges.

The charges are made by the credit card companies when you go over your credit limit, pay late or fail to honour a payment. By law the charges are supposed to cover the actual costs, but the OFT has found that companies are in fact profiteering by imposing high fees that way exceed the true cost of managing the account.

The move is a further attempt to force the industry to start playing fair with borrowers. Hidden charges throughout the industry subsidise incentives and special offers that lenders use to win over customers. Excessive default charges means that those who can least afford them are paying for card companies to give interest free periods and other incentives.

Both lenders and borrowers are set to be charged fees for using the Zopa money lending service, reversing a previously stated intention of only levying charges on borrowers.

Zopa is a service that enables people to lend money to each other without having to using a bank. It claims to be particularly appropriate for the self employed, and others who are creditworthy but have difficulties borrowing from the major banks.

At its launch, Zopa announced that it would be charging borrowers an arrangement fee of 1% when loans were completed. It has run an opening offer that waives all fees.

Consumers have won the right for protection on overseas credit card purchases following a landmark ruling by the Court of Appeal.

Lawyers for three credit card companies, Lloyds TSB, Tesco Personal Finance (part of the Royal Bank of Scotland Group) and American Express had tried to argue that the legislation that gave credit card holders protection at home did not apply when they went abroad. They claimed that section 75 of the Consumer Credit Act 1974 did not apply to overseas purchases. Their claim was upheld by a High Court ruling in November 2004.

However, the Office of Fair Trading disagreed and now the Court of Appeal has backed their argument that the law was intended to cover all credit card transactions, regardless of where they were made.

Recently we've noticed an increase in the number of companies promoting "credit file" or "credit reference" products, and we thought it good time to dispel some of the common myths about your credit information.

Your credit file is simply a collection of information about your credit agreements. Information includes the amount you owe, the total credit limit available to you, and how good you are at making payments on time.

The three main agencies are Call Credit, Equifax and Experian. Whilst all of these companies peddle products giving you online access to your credit "score" and report, you are entitled by law to a copy of your credit file for payment of a £2 fee. You can pay this online (except for Call Credit), or complete an application form and send it by post.

The Financial Services Authority (FSA) is encouraging banks and other firms to do much more to protect customers against fraud.

A recent report found that senior managers of firms agreed more should be done, and the FSA is urging them to take steps to detect fraud much earlier. Philip Robinson, financial crime sector leader at the FSA, said:

"A robust fraud strategy is one that is sponsored at the highest level within a firm and embedded within the culture. While the larger firms have been forced to wake up to fraud, those that have so far remained outside the fraudsters' radar are not as developed. Fraud threats are dynamic and fraudsters constantly devise new techniques to exploit the easiest target. Firms need to continue to invest in systems and controls and manage their responses to fraud in order to avoid being targeted as the weakest link."

Plans to introduce a traffic light system denoting whether or not a customer must pay to use a cash machine have been thrown into doubt by Abbey believing that the scheme will compromise their brand image.

The idea, backed by many banks and consumer organisations, is to require cash machines that charge for cash withdrawals to show a clear red notice, whilst fee free machines will show a green notice. The scheme enables customers to see whether a machine charges from a distance, and helps remove confusion where customers are unsure as to whether or not they will be charged.

A trial involving 23,500 Lloyds TSB customers has seen online banking fraud completely defeated by using a special key ring that generates a unique password for each occasion that the customer wishes to access the account.

The devices have been used for some time by companies wishing to secure access to their networks, but this is the first time it has been successfully trialled in retail banking. When the customer wishes to access the account, they go through normal security procedures, including entering password information. Then a six digit number is entered that has been generated by the key ring. The number is determined according to algorithm only known by the bank's computers, and is only valid for that internet banking session.

Barclays Bank customers who fail to keep an eye on their overdraft will face a hefty increase in charges when they bounce payments or if the bank allows a payment that takes them over their overdraft limit.

The new charges are being introduced by Barclays Bank from 31st March:

• Paid Referral fees increase from £25 to £30 (going over your overdraft limit but the bank allows the payment)
  • Unpaid item fees increase from £30 to £35 (bouncing an item)

Customers who have a basic bank account, which does not allow an overdraft, pay a reduced fee of £15 for unpaid items.