David Prosser: The banks send the OFT packing

Outlook They are smart cookies at HSBC. Within hours of the Office of Fair Trading announcing yesterday that it had come to a deal with the banks on unauthorised borrowing fees, HSBC proudly unveiled a new launch. Its customers will soon be able to opt for an account that does not allow them to exceed an agreed overdraft limit, so the question of penalty fees will never arise.

There is just one snag with the bank's new deal: customers will have to pay a £15 monthly fee for the account. In other words, peace of mind that HSBC will never charge you outlandish unauthorised borrowing charges will cost £180 a year.

Is this what the OFT has in mind when it talks about how competition in the current account market will force the banks to mend their ways? Well let's hope it works, because the OFT hasn't pulled off the trick.

Yesterday's deal with the banks represents the final fizzling out of what once promised to be an explosive investigation into the current account sector. Having failed to get a result in its High Court action on borrowing charges, the OFT was forced to seek a voluntary agreement with the banks. The commitments now made by the industry – in particular, to let customers opt out of unarranged overdraft facilities – were the best the OFT could do.

The watchdog's two-year investigation has had some positive results. The public focus on borrowing charges has led to many banks reducing them – the OFT reckons overdraft penalties are now half as high as they were a year ago. And the industry has also agreed to make it easier for customers to switch accounts.

Still, there is nothing to stop banks charging what they like when customers breach agreed borrowing limits. While average fees have come down, there are still many instances of unacceptably high charges.

Moreover, all those claims for compensation from customers caught out by charges in the past have come to nothing, because the OFT's legal defeat has left victims high and dry. Those claims – more than a million of them, worth several billion pounds collectively – are now being routinely dismissed.

It's worth remembering that the courts ruled that the OFT was exceeding its powers by investigating the level of charges, not that the charges, in themselves, were fair. But the regulator seems to have decided that the judgment was a knock-out punch, rather than seeking an alternative remedy.

The OFT may be right when it says that new entrants to the banking sector will make it harder for the established players to go on as if nothing has changed. But the regulator's threat of more action, should current account terms and conditions not go on improving, will hardly have the banks quaking in their boots.