Plans to reduce high level bank charges will not extend to penalty fees when consumers exceed overdraft limits, according to the Office of Fair Trading (OFT).

Last month OFT criticised lenders for charging 'excessive' penalty fees, on things such as late payments or consumers who exceeded their credit card limits, and demanded the charges were reduced from the average £25 to £12.

But OFT have reconsidered their findings and revealed the plan to cut the cost of fees will not be applied to overdrafts.

"There will be a sigh of relief from the banks, but current account consumers will hardly be pleased that the oppressive fees applied to unauthorised overdrafts have apparently won a stay of execution," said Stuart Glendinning, director at moneysupermarket.com

UK credit card holders pay out nearly £116 million a year from just going over their credit limit or failing to make payments on time.

Unauthorised overdraft fees at the big four banks range from £25 at HSBC and £28 at NatWest, to £30 at both Barclays and Lloyds.

OFT said the default charge was unfair if it meant consumers would pay more than a court would award if they were sued for breach of contract

"We expect credit card issuers to adjust their default fee levels quickly. We have not ruled out future legal action if the market does not respond positively," said OFT chief executive John Fingleton