Bank charges ruling good news for consumers

By Matthew Whiting
29th April 2008

The long-awaited announcement from the High Court last week that the Office of Fair Trading (OFT) does in fact have the power to determine whether bank charges up to £39 for exceeding overdraft limits were unfair, is great news for people who are claiming a refund on excessive fees.

While this ruling from Justice Andrew Smith doesn’t mean the fees themselves are unfair, at least the ball is now rolling, and banks have until 22nd May to appeal the decision.

Claim 2 Gain has taken a number of bank charges complaints to the Financial Ombudsman Service about unfair charges on behalf of clients and believes that the majority of bank fees in question were charged unfairly. This is because legally, a penalty charge is only supposed to cover the company’s costs where a contract has been broken, and it is hard to believe it could ever cost a bank more than a few pounds to administer as nowadays everything is automated. Banks are simply not allowed to profit from penalty charges, but only from services. Fees of up to £39 per overdraft breach are obviously raking in profit otherwise the banks wouldn’t be fighting tooth and nail to protect them.

The OFT agrees that the bank charges are unfair, and will hopefully have the opportunity to make this judgement official in the not too distant future. In contrast with the OFT who initiated the court case in the first place, the Financial Services Authority (FSA) has been poor in supporting the plight of the consumer. It was the FSA who initiated the waiver on bank charges last July, suspending all claims until the conclusion of the case. This has served the banks well, but left thousands of consumers at the mercy of the lengthy court system.

The FSA should have been at the forefront of this case championing the rights of the consumer; instead they merely reserved the right to get involved, but basically washed their hands of it. It is time FSA acted in the best interests of consumers and lifted the waiver on claims as soon as possible to allow them to be processed. If the banks can continue to highly charge questionable fees, at the very least, customers should be able to complain about them – otherwise it’s not a level playing field.

As soon as the waiver is lifted then the Ombudsman can consider the claims and make a judgment based on the existing law. This would be even better news for the consumer as the Ombudsman is more likely to judge in their favour. Why? because the banks’ arguments just don’t stack up.

For more information about claims on bank charges, PPI or credit card charges, call 0845 618. 9070.