Bank charges hang in the balance as test case awaits judges decision

[Legal Beagles]

Now that both sides have been heard in the case of the Office of Fair Trading versus potentially u...

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[Amethyst]

Re: Bank charges hang in the balance as test case awaits judges decision

Bank charges hang in the balance as test case awaits judge's decision

21/02/2008

Now that both sides have been heard in the case of the Office of Fair Trading versus potentially unfair bank charges, it is up to the judge Mr Justice Andrew Smith to decide whether the charges are indeed unfair, and determine which side will emerge victorious.

Customers and banks alike both have a lot riding on the test case, as the banks have reportedly been making approximately £3.5 billion every year from charging their customers up to £40 a go for exceeding overdrafts, bouncing cheques and having insufficient cleared funds for Direct Debits.

If the OFT is successful and the high court rules that the charges are not in proportion with the crime, millions of customers will be able to claim back the charges that have been taken from their bank accounts over the last six years. Customers already claimed back £800 million before a freeze was put on further claims until a legal clarification could be reached.

A further £4.7 billion could be reclaimed if the court rules in favour of the OFT, but there are fears that an end to unfair bank charges will also mean an end to free banking, because banks will look elsewhere to recoup their lost profits.

The eight banks which the OFT took to court – Abbey, Barclays, HBOS, Clydesdale, HSBC, RBS-Natwest, Lloyds TSB and Nationwide Building Society – maintain that the charges are fair and reflect the administration costs incurred by the bank when a customer breaks the terms and conditions of their account.

It is not thought that a decision will be easily forthcoming, with some pessimistically not expecting a resolution for some time. Even if the OFT wins this initial, hurdle, the banks can fight back by appealing the decision, which could take an additional 12 months.

The OFT is adamant that the charges be reduced under consumer protection legislation, specifically the Unfair Terms in Consumer Contract Regulations. The regulator believes that the current wording needs to be amended so that it is written in plain English, because the current format renders it impossible for even financial experts to understand, begging the question of how the average consumer will be able to fathom it.

© Fair Investment Company Ltd










Bit of a late print on this story and doesnt seem to have anything new.

[Guest]

Re: Bank charges hang in the balance as test case awaits judges decision

I agree, a tired rehash - and talks again of the banks' apparent right to recoup "lost profits"

Not unlawful profits then?

[argentarius]

Re: Bank charges hang in the balance as test case awaits judges decision

Unlawful or not, they are still lost and the article's point stands! I think you are picking too much. But you are quite right that it doesn't raise anything new.

[Guest]

Re: Bank charges hang in the balance as test case awaits judges decision

I disagree. That particular oft repeated point is not only very tiresome and lazy reporting, it is manifestly wrong.

Let me put this in simple terms - if Tesco decided to sell Crack Cocaine because the profit margin was higher than bread and then, because it is unlawful to sell Crack Cocaine, they were prevented from doing so, would it be reasonable that they then increase the price of bread to make up the "lost" profit?

If a stream of profit for a company is derived from something that they should not be doing then why do they think - and all those who comment on it from the press etc. - that they should be allowed to make up this "lost" profit elsewhere?

The element of profit that is derived from those unlawful fees should be denied them and the banks need to understand that they cannot expect to simply make that up from other sources - they should not have been enjoying it in the first place!