The City watchdog said it will be closely monitoring how changes made to unauthorised overdraft charges by banks will affect customers.

The Financial Services Authority granted banks a waiver in July which enabled them to put off dealing with any claims for refunds of the charges until the result of a test case brought by the banks and the Office of Fair Trading on the issue is known.

But one of the conditions of the waiver was that banks would not make materially adverse changes to the level of their unauthorised overdraft charges.

The regulator said that a number of firms had changed their terms and conditions relating to the charges.

It said it would be closely monitoring how these changes would affect customers in practice and whether it amounted to a breach of the waiver.

But overall the FSA said the waiver was operating efficiently and could remain in place.

It added that firms were complying with the conditions of the waiver, including the need for clear communications with customers and treating people who were in financial difficulties appropriately.

But the FSA said it planned to carry out further work with the Banking Code of Standards Board to ensure banks continued to treat people who were in genuine financial difficulty in the right way.

However, the Financial Service Consumer Panel said the FSA should do more to publicise the fact that people who are in genuine financial hardship do not have to wait for the outcome of the test case for their refund to be considered.

It also called on the regulator to investigate reports that some consumers had been wrongly told by providers that complaints in regard to credit card charges are also covered by the waiver.

John Howard, chairman of the Financial Services Consumer Panel, said: "Although we understand why the FSA has put the waiver in place, it has had the unfortunate effect of delaying consumers' access to justice, whilst allowing the banks to continue taking money from accounts for what may turn out to be illegal charges.

"The longer this goes on the more unfair it will be, especially on those in financial hardship."

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