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09-01-08
Thousands of customers who want to reclaim heavy overdraft charges on their current
accounts have been left in limbo after an agreement this summer between the Office of Fair
Trading and the banks to seek a High Court ruling on whether the charges are legal. Bob
Howard has more.
HOWARD:
Paul, we finally have a date. On 14
th
January seven banks, the
Nationwide Building Society and the Office of Fair Trading will go to the High Court. There
they’ll begin to thrash out whether charges on current accounts are illegal penalties - as the
OFT alleges - or legal payments for a core customer service as the banks argue. Round one
Page 6
6
will determine whether the unfair terms in consumer contracts regulations cover these charges.
Cavendish Elithorn from the OFT says he hopes the legal process won’t become drawn out.
ELITHORN:
We think that although there are eight banks, the arguments the
banks are likely to make would be very similar so I don’t envisage eight barristers getting up
and making the same arguments eight times in court. We think that the banks are keen to
resolve this and I don’t think it’s in their interest to drag something out for a number of years
only to then discover that they have to pay all that money back anyway. Where I think it will
take longer is as we get into the financial numbers about fairness.
HOWARD:
But deciding what a fair charge is could take some time and as
part of the OFT’s deal with the banks customers hoping to reclaim their charges this year are in
most cases going to be disappointed. Firstly the Financial Services Authority has now told the
banks they don’t have to process any new claims for a year or until the case is resolved. Then
the Financial Ombudsman’s Service, which has helped customers reclaim charges, has said it
will now only deal with hardship cases in the meantime. That just leaves the courts as the only
way to reclaim. So what’s happening there? Stephen Gerlis is the Chair of the London
Association of District Judges.
GERLIS:
Cases are still being listed and the guidance has been that there
shouldn’t be a sort of blanket stay, but that if a request for a stay is made it ought to be
granted. They’re not obliged to do it. It’s guidance handed down from senior judges. My
understanding is that the vast majority of judges in the country in the vast majority of courts
are now ordering a stay pending the outcome of the proceedings in the High Court.
HOWARD:
But whilst the banks don’t need to pay out any more money,
they can continue to levy these disputed charges. The Financial Services Authority has told
Money Box it can’t order a temporary stay on current account charges, it can only wait for the
High Court to determine their legality, but it will review its decision to allow banks to stop
processing customers applications for refunds at the end of this month. Martin Lewis, founder
of the website MoneySavingExpert, says it’s unfair to stall consumers claims whilst allowing
Page 7
7
the banks to continue to levy charges.
M. LEWIS:
The OFT could have taken this without a stay. It is anti-
democratic, it is anti-consumer, it means peoples’ finances are being hurt. People are having
charges levied on them that they can’t reclaim. You know there are people arguing it goes
against human rights. The FSA has a chance to pull this stay because it’s hurting consumers;
and if they want cases on it, I’ve got lots.
HOWARD:
Some late offers by the banks are still coming through, but they
can be a long way below what customers are asking for. Anthony Sultan’s the Managing
Director of Brunel Franklin, which owns Conkers, a company which helps customers reclaim
their bank charges for a fee of around 30% of what the bank pays out. He says banks are using
the forthcoming OFT test case to pressurise customers into accepting a fraction of what
they’re entitled to.
SULTAN:
If we take Lloyds, for example, if you’re owed some £3,500 or
thereabouts, they’re offering £750. They’re really putting consumers under pressure to accept
and I think there are many consumers in such a difficult financial position that they’re actually
accepting these offers.
HOWARD:
Customers who’ve recently received an offer from their bank
have 2 months to decide whether to accept or reject. Doug Taylor from Which? says
consumers who are offered less than they want have a difficult decision to make.
TAYLOR:
It’s up to the individual whether they want to take their risk
with the case or whether they want to take the money, so it’s bird in the hand or in the bush so
to speak. What certainly will be the case is if somebody accepts a partial offer, if the case goes
in favour of the consumer in the High Court they won’t then be able to go back for a top up.
So people have got to make a judgement.
HOWARD:
So, Paul, consumer groups are now urging those who want to
try and reclaim but have yet to do anything about it to put their claim into the bank as soon as
possible. Because you can only claim for charges going back 6 years, they say every month
customers delay may mean they lose the right to claim charges which go back beyond this.
Page 8
8
LEWIS:
Thanks for that, Bob. Well earlier I spoke to Angela Knight,
Chief Executive of the British Bankers’ Association. I asked her first if the banks were taking
advantage of the pending court case by offering less money to people who’d already put in
their claims for refunds.
KNIGHT:
The banks wouldn’t agree with that. They would say look
we’re making a fair offer and it’s up to the individual as to whether they want to wait until the
outcome or whether they want to take an offer that’s being made now. And the banks would
say and do say that the offers that they are making to their customers are fair.
LEWIS:
We have heard that these offers are now half what they were.
That’s not true you’re saying?
KNIGHT:
I can’t talk about an individual case obviously.
LEWIS:
So they could be?
KNIGHT:
I have heard everything. I have heard every conceivable view
given on this subject. Banks have always been making offers to their customers. The case will
ultimately decide exactly which way this all goes way and it is up to the individual what they
want to do. And, after all, don’t forget individuals can avoid getting an unauthorised overdraft
charge anyway. That is by just sort of keeping an eye on your account, talking to your bank
and making the proper arrangements first.
LEWIS:
Now this case is finally going to court, as you say. That
process is going to take a little while.
KNIGHT:
Yes.
LEWIS:
Will your members stop making these charges for unauthorised
overdrafts until the judges decide whether they’re legal or not?
KNIGHT:
What our banks are doing is they’re saying to their customers
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9
that of course you know there are conditions surrounding the agreement that the individual has
with the bank and that is no more or no different now than it was one month ago, three months
ago or whatever.
LEWIS:
No, but … Forgive me for interrupting you, but the courts are
going to decide if those conditions are legal or not. Why do they not stop making these
charges until the judges have decided that?
KNIGHT:
Well there is still a significant process that is triggered if an
individual goes overdrawn, borrows money if you like that they haven’t got without notifying
the bank first, and that is the same situation now as it was one week ago, one month ago or six
months ago.
LEWIS:
Yes. The difference though is that it’s going to court and
meanwhile no-one can claim the charges back, so although the reclaims have been suspended
the charges haven’t.
KNIGHT:
Because the banks of course say now, as they have always said,
that the procedure and process that they’re following is legal.
LEWIS:
Yes. Despite that though, they have paid out nearly £400
million this year alone in refunded overdraft charges. If you lose the case, you’ll have to
compensate people, perhaps millions of people, with many hundreds of millions of pounds.
Wouldn’t it be better to protect yourselves by stopping these charges now?
KNIGHT:
Well what the banks have done is exactly that in the sense that
they have sought to protect customer and protect the situation equally by going to the courts.
LEWIS:
The court case starts on 14
th
January in the High Court, but if it
goes to the Court of Appeal and then possibly the House of Lords, it’s going to be a couple of
years before it’s resolved, isn’t it? Meanwhile, your members carry on making the same
charges that may or may not be legal and people can’t claim for compensation.
KNIGHT:
Legal process is as legal process is. If there are delays, it won’t
Page 10
10
be from our making. Our banks are committed to try and get this procedure over as quickly as
possible.
LEWIS:
Do you think it might go on years, the possibility is it could go
on years?
KNIGHT:
I’ve no idea is the answer because I do not know how long even
the first stage is going to take place. I’m not going to predict outcomes. The only thing that I
can say on that is that the banks are doing what they understand to be a legal and fair process
in which 80, 85% of their customers pay nothing and those who are getting unauthorised
overdraft charges, they know how to avoid this.
LEWIS:
Angela Knight, Chief Executive of the British Bankers’
Association.
Now if you checked into a ho
Thousands of customers who want to reclaim heavy overdraft charges on their current
accounts have been left in limbo after an agreement this summer between the Office of Fair
Trading and the banks to seek a High Court ruling on whether the charges are legal. Bob
Howard has more.
HOWARD:
Paul, we finally have a date. On 14
th
January seven banks, the
Nationwide Building Society and the Office of Fair Trading will go to the High Court. There
they’ll begin to thrash out whether charges on current accounts are illegal penalties - as the
OFT alleges - or legal payments for a core customer service as the banks argue. Round one
Page 6
6
will determine whether the unfair terms in consumer contracts regulations cover these charges.
Cavendish Elithorn from the OFT says he hopes the legal process won’t become drawn out.
ELITHORN:
We think that although there are eight banks, the arguments the
banks are likely to make would be very similar so I don’t envisage eight barristers getting up
and making the same arguments eight times in court. We think that the banks are keen to
resolve this and I don’t think it’s in their interest to drag something out for a number of years
only to then discover that they have to pay all that money back anyway. Where I think it will
take longer is as we get into the financial numbers about fairness.
HOWARD:
But deciding what a fair charge is could take some time and as
part of the OFT’s deal with the banks customers hoping to reclaim their charges this year are in
most cases going to be disappointed. Firstly the Financial Services Authority has now told the
banks they don’t have to process any new claims for a year or until the case is resolved. Then
the Financial Ombudsman’s Service, which has helped customers reclaim charges, has said it
will now only deal with hardship cases in the meantime. That just leaves the courts as the only
way to reclaim. So what’s happening there? Stephen Gerlis is the Chair of the London
Association of District Judges.
GERLIS:
Cases are still being listed and the guidance has been that there
shouldn’t be a sort of blanket stay, but that if a request for a stay is made it ought to be
granted. They’re not obliged to do it. It’s guidance handed down from senior judges. My
understanding is that the vast majority of judges in the country in the vast majority of courts
are now ordering a stay pending the outcome of the proceedings in the High Court.
HOWARD:
But whilst the banks don’t need to pay out any more money,
they can continue to levy these disputed charges. The Financial Services Authority has told
Money Box it can’t order a temporary stay on current account charges, it can only wait for the
High Court to determine their legality, but it will review its decision to allow banks to stop
processing customers applications for refunds at the end of this month. Martin Lewis, founder
of the website MoneySavingExpert, says it’s unfair to stall consumers claims whilst allowing
Page 7
7
the banks to continue to levy charges.
M. LEWIS:
The OFT could have taken this without a stay. It is anti-
democratic, it is anti-consumer, it means peoples’ finances are being hurt. People are having
charges levied on them that they can’t reclaim. You know there are people arguing it goes
against human rights. The FSA has a chance to pull this stay because it’s hurting consumers;
and if they want cases on it, I’ve got lots.
HOWARD:
Some late offers by the banks are still coming through, but they
can be a long way below what customers are asking for. Anthony Sultan’s the Managing
Director of Brunel Franklin, which owns Conkers, a company which helps customers reclaim
their bank charges for a fee of around 30% of what the bank pays out. He says banks are using
the forthcoming OFT test case to pressurise customers into accepting a fraction of what
they’re entitled to.
SULTAN:
If we take Lloyds, for example, if you’re owed some £3,500 or
thereabouts, they’re offering £750. They’re really putting consumers under pressure to accept
and I think there are many consumers in such a difficult financial position that they’re actually
accepting these offers.
HOWARD:
Customers who’ve recently received an offer from their bank
have 2 months to decide whether to accept or reject. Doug Taylor from Which? says
consumers who are offered less than they want have a difficult decision to make.
TAYLOR:
It’s up to the individual whether they want to take their risk
with the case or whether they want to take the money, so it’s bird in the hand or in the bush so
to speak. What certainly will be the case is if somebody accepts a partial offer, if the case goes
in favour of the consumer in the High Court they won’t then be able to go back for a top up.
So people have got to make a judgement.
HOWARD:
So, Paul, consumer groups are now urging those who want to
try and reclaim but have yet to do anything about it to put their claim into the bank as soon as
possible. Because you can only claim for charges going back 6 years, they say every month
customers delay may mean they lose the right to claim charges which go back beyond this.
Page 8
8
LEWIS:
Thanks for that, Bob. Well earlier I spoke to Angela Knight,
Chief Executive of the British Bankers’ Association. I asked her first if the banks were taking
advantage of the pending court case by offering less money to people who’d already put in
their claims for refunds.
KNIGHT:
The banks wouldn’t agree with that. They would say look
we’re making a fair offer and it’s up to the individual as to whether they want to wait until the
outcome or whether they want to take an offer that’s being made now. And the banks would
say and do say that the offers that they are making to their customers are fair.
LEWIS:
We have heard that these offers are now half what they were.
That’s not true you’re saying?
KNIGHT:
I can’t talk about an individual case obviously.
LEWIS:
So they could be?
KNIGHT:
I have heard everything. I have heard every conceivable view
given on this subject. Banks have always been making offers to their customers. The case will
ultimately decide exactly which way this all goes way and it is up to the individual what they
want to do. And, after all, don’t forget individuals can avoid getting an unauthorised overdraft
charge anyway. That is by just sort of keeping an eye on your account, talking to your bank
and making the proper arrangements first.
LEWIS:
Now this case is finally going to court, as you say. That
process is going to take a little while.
KNIGHT:
Yes.
LEWIS:
Will your members stop making these charges for unauthorised
overdrafts until the judges decide whether they’re legal or not?
KNIGHT:
What our banks are doing is they’re saying to their customers
Page 9
9
that of course you know there are conditions surrounding the agreement that the individual has
with the bank and that is no more or no different now than it was one month ago, three months
ago or whatever.
LEWIS:
No, but … Forgive me for interrupting you, but the courts are
going to decide if those conditions are legal or not. Why do they not stop making these
charges until the judges have decided that?
KNIGHT:
Well there is still a significant process that is triggered if an
individual goes overdrawn, borrows money if you like that they haven’t got without notifying
the bank first, and that is the same situation now as it was one week ago, one month ago or six
months ago.
LEWIS:
Yes. The difference though is that it’s going to court and
meanwhile no-one can claim the charges back, so although the reclaims have been suspended
the charges haven’t.
KNIGHT:
Because the banks of course say now, as they have always said,
that the procedure and process that they’re following is legal.
LEWIS:
Yes. Despite that though, they have paid out nearly £400
million this year alone in refunded overdraft charges. If you lose the case, you’ll have to
compensate people, perhaps millions of people, with many hundreds of millions of pounds.
Wouldn’t it be better to protect yourselves by stopping these charges now?
KNIGHT:
Well what the banks have done is exactly that in the sense that
they have sought to protect customer and protect the situation equally by going to the courts.
LEWIS:
The court case starts on 14
th
January in the High Court, but if it
goes to the Court of Appeal and then possibly the House of Lords, it’s going to be a couple of
years before it’s resolved, isn’t it? Meanwhile, your members carry on making the same
charges that may or may not be legal and people can’t claim for compensation.
KNIGHT:
Legal process is as legal process is. If there are delays, it won’t
Page 10
10
be from our making. Our banks are committed to try and get this procedure over as quickly as
possible.
LEWIS:
Do you think it might go on years, the possibility is it could go
on years?
KNIGHT:
I’ve no idea is the answer because I do not know how long even
the first stage is going to take place. I’m not going to predict outcomes. The only thing that I
can say on that is that the banks are doing what they understand to be a legal and fair process
in which 80, 85% of their customers pay nothing and those who are getting unauthorised
overdraft charges, they know how to avoid this.
LEWIS:
Angela Knight, Chief Executive of the British Bankers’
Association.
Now if you checked into a ho
