���˿���

Britain's banks are "ripping off" their customers, Business Secretary Vince Cable has told the ���˿���.

Mr Cable said forcing banks to change their practices would be a key test of the coalition government.

His comments come as research for Panorama reveals that high street banks surveyed are charging as much as 167% interest on unauthorised overdrafts.

Authorised overdrafts are charging an average of 32% interest, despite advertised rates of around 19%.

Fine print

In response to the findings, Mr Cable said: "When we talk about restructuring the banks what's going to come out of this is a more competitive system where the customers are not ripped off."

He said customers are paying the price for a lack of healthy competition in a banking marketplace dominated by a few big players.

"One of the negative side effects of this crisis is that our banking system that was already very concentrated is now even more concentrated so there's less competition, less choice and bigger temptation for banks to earn margins at the expense of their customers," he said.

Christine Ross, head of financial planning at SG Hambros which examined the true cost of overdrafts, urged consumers to read the fine print on their account details.

"What we found is that unless individuals really scrutinise the small print the overdraft rates charged are far higher than they could even imagine," she said.

Mr Cable also issued a renewed attack on the morality of the City over bonus payments: "I think the bonus culture which continues is unacceptable.

"The coalition agreement makes it very clear that unacceptable bonuses are continuing and that is something we want to try to stop and that reflects the lack of moral compass."

According to the Office of Fair Trading, in 2006, Britain's banks earned £2.6bn in profit from penalty charges.

The British Bankers' Association said in a statement that overdrafts are meant to be short term measures and are used by a relatively small number of banking customers for a few days at a time.

"As overdrafts are designed for accounts where the balance only occasionally tips into the red for a few days, it is impossible to calculate accurate annual lending rates. The estimated costs are based on average figures and the amount of time overdrafts are used."

'Very unfair'

Bank customers also complained to Panorama about the Halifax, which is owned by Lloyds Group Plc, a recipient of more than £20bn from the taxpayer in the bailout in late 2008.

They said it was charging an effective annual rate of interest of 3,650% on an overdraft of just £10.

Instead of charging advertised interest on overdrafts, the bank is instead charging a flat fee of £1 a day. But over the course of a year, customers with small overdrafts end up paying a disproportionately high rate of interest.

The Halifax said in a statement that customers have said they "want a clear overdraft charging structure" and the £1 a day represents "a simple set of daily fees".

The bank said it offers a "buffer zone" for overdrafts of less than £10 that is free and that the vast majority of its customers do not go into overdraft.

Merryn Somerset Webb, editor-in-chief of MoneyWeek, said of the Halifax policy: "It is very unfair because the interest rates effectively are much, much higher for people with tiny overdrafts than for very big overdrafts. So you can be penalised extraordinarily badly."

How to Beat the Banks, ���˿��� One, Monday, 19 July at 2030 BST and then available in the UK on the ���˿��� iPlayer.