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Bank breaks rules on charges court case
James Coney, Daily Mail
23 July 2008
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A major High Street bank has broken the terms of the legal waiver that allowed it to put all overdraft charge complaints on hold.
Below the belt: Bank of Scotland sent on debt collectors over a customer's unpaid bank charges
Under the legal waiver drawn up by City watchdog the Financial Services Authority (FSA), banks have been given permission to put on hold all bank charge complaints until their court case with the Office of Fair Trading has been resolved.
But they are not allowed to close a customer's account or do anything that adversely affects their complaint.
Bank of Scotland had admitted that the account was 'accidentally' sold to a debt collection agency and that, under the terms of the waiver, this should not have happened.
The customer, who does not want to be named, had sought a refund of £2,113.27 worth of bank charges in December 2006. The complaint had been acknowledged, and he and the Bank of Scotland had exchanged a series of letters.
When the OFT court case was announced, the customer's complaint, like thousands of others, was put on ice. He had dipped overdrawn by just a small amount - £40. On the back of this, charges mounted.
Bank of Scotland charges £35 for bouncing or paying a cheque or transaction if you are beyond your overdraft limit. It also charges £28 a time for dipping into the red.
He was soon in financial difficulty as charges started to be imposed on charges - pushing him further into the red. By the time he was told of the waiver, he was almost £1,000 over his £1,250 authorised overdraft.
He stopped paying his salary into his current account as it was only enough to cover the bank charges. Last month, he received a further letter from the Bank of Scotland stating: 'As previously agreed with the Financial Ombudsman Service and FSA, customer complaints relating to unarranged overdraft charges will remain on hold.'
However, Bank of Scotland then cancelled his authorised overdraft.
On July 8, CapQuest Debt Recovery wrote stating that his White Label Current Account 'together with others' had been 'sold' and that it had been appointed to 'manage your account in all matters relating to collection and litigation'.
It also stated: 'Legal action will increase the amount you owe and may have a detrimental effect on your credit worthiness.'
Under the FSA waiver, current accounts still run in the normal way - you can still incur unauthorised overdraft charges and the actual account is not frozen. This has confused many.
Reclaim bank charges
While this is made clear on the websites of most banks, many have not explicitly said it in letters.
Rule 13 of the waiver states firms should not: 'Close accounts or threaten closure of accounts of customers for the purpose (or with the intent) of penalising customers that have complained about unauthorised overdraft charges, or deterring future complaints from these customers or others.'
Money Mail has handed the details of the case to the FSA. It could not comment on this specific example.
A spokesman for the FSA said: 'We cannot interfere with these charges as their fairness and lawfulness is currently being contested, and as yet we have no resolution.'
A spokesman from the Bank of Scotland admitted that a mistake had been made and that the account would be bought back from the debt collectors. It was also investigating whether other customers had accidentally had their accounts sold.
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