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FT and banks go to court to clarify charges
Fri Jul 27, 2007 8:14AM BST
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LONDON (Reuters) - The Office of Fair Trading will start High Court proceedings on Friday to clarify whether bank charges on unauthorised overdrafts are fair.
The move follows an OFT investigation launched in March after a consumer backlash against retail bank charges for unauthorised overdrafts.
Some estimates have said banks receive as much as 4.7 billion pounds in charges a year, although others estimate the figure is nearer 1 billion pounds.
"Tens of thousands of complaints that these charges are unfair have been received by the County Courts and the Financial Ombudsman Service," the OFT said in a statement.
"The banks do not accept that the unfairness rules of the Unfair Terms in Consumer Contract Regulations apply. The OFT believes that they do and is seeking to establish this legal principle clearly in the court."
Six major banks, including Barclays, HSBC and Royal Bank of Scotland, are participating in the test case as they say they want to clarify the law as well.
"The banks have always been firmly of the view that the fees they charge customers are fair and clear," said Angela Knight, chief executive of the British Bankers' Association (BBA), the industry lobby group.
"The court case will clarify these points and provide certainty for customers and banks alike."
Court proceedings will kick off on Friday but the case is not expected to be hear until the autumn, and the BBA said it did not know how long it would last.
The Financial Services Authority has agreed to suspend all refunds paid by banks until the court decision is made, although the BBA said claims for refunds can still be made and would be paid out if the court says they should be refunded.
Banks have to date refused to say how much they have repaid in refunds, but they are expected to clarify payouts when they report half-year results next week.
Investment bank Credit Suisse last week estimated the major banks paid out 200 million pounds in the first half of the year, although some industry observers said that figure may be conservative.
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Tens of thousands of Britons have claimed back penalty fees this year, spurred on by high profile media coverage and Internet sites allowing them to download template letters and detailing the procedure to claim back charges.
They have also been encouraged by anecdotal evidence that banks are repaying the charges in full.
Most banks charge between 24 pounds and 39 pounds for an unauthorised overdraft or a bounced cheque, but can charge that more than once a month.
Consumers can claim back up to six years of charges.
Involved alongside HSBC, RBS and Barclays in the test case are HBOS, Lloyds TSB, Abbey, Clydesdale and building society Nationwide. Together they provide about 90 percent of UK personal current accounts.
Fri Jul 27, 2007 8:14AM BST
Email This Article |Print This Article | Reprints
[-] Text [+]
LONDON (Reuters) - The Office of Fair Trading will start High Court proceedings on Friday to clarify whether bank charges on unauthorised overdrafts are fair.
The move follows an OFT investigation launched in March after a consumer backlash against retail bank charges for unauthorised overdrafts.
Some estimates have said banks receive as much as 4.7 billion pounds in charges a year, although others estimate the figure is nearer 1 billion pounds.
"Tens of thousands of complaints that these charges are unfair have been received by the County Courts and the Financial Ombudsman Service," the OFT said in a statement.
"The banks do not accept that the unfairness rules of the Unfair Terms in Consumer Contract Regulations apply. The OFT believes that they do and is seeking to establish this legal principle clearly in the court."
Six major banks, including Barclays, HSBC and Royal Bank of Scotland, are participating in the test case as they say they want to clarify the law as well.
"The banks have always been firmly of the view that the fees they charge customers are fair and clear," said Angela Knight, chief executive of the British Bankers' Association (BBA), the industry lobby group.
"The court case will clarify these points and provide certainty for customers and banks alike."
Court proceedings will kick off on Friday but the case is not expected to be hear until the autumn, and the BBA said it did not know how long it would last.
The Financial Services Authority has agreed to suspend all refunds paid by banks until the court decision is made, although the BBA said claims for refunds can still be made and would be paid out if the court says they should be refunded.
Banks have to date refused to say how much they have repaid in refunds, but they are expected to clarify payouts when they report half-year results next week.
Investment bank Credit Suisse last week estimated the major banks paid out 200 million pounds in the first half of the year, although some industry observers said that figure may be conservative.
-----------------------------------------------------------------------
Tens of thousands of Britons have claimed back penalty fees this year, spurred on by high profile media coverage and Internet sites allowing them to download template letters and detailing the procedure to claim back charges.
They have also been encouraged by anecdotal evidence that banks are repaying the charges in full.
Most banks charge between 24 pounds and 39 pounds for an unauthorised overdraft or a bounced cheque, but can charge that more than once a month.
Consumers can claim back up to six years of charges.
Involved alongside HSBC, RBS and Barclays in the test case are HBOS, Lloyds TSB, Abbey, Clydesdale and building society Nationwide. Together they provide about 90 percent of UK personal current accounts.
