Bank charges verdict in

 

May 31, 2008

Since January of this year many people have been waiting with bated breath the hear what the verdict would be in relation to bank charges for unauthorised overdrafts, returned direct debits, and bounced cheques. In the past, banks have charged hefty fees for such oversights, with some banks charging up to £40 per fee. However, over the past couple of years bank charges have been at the centre of controversy, with the Office of Fair Trading branding them unlawful and unfair, because the fees were sometimes ten times the costs incurred by the banks.

Up until last summer many banking customers had claimed back bank charges going back up to six years, with banks paying out millions. Many customers also filed claims in court to reclaim their bank charges. However, last summer these claims were put on hold, as it was decided that a test case would have to be held in order to determine whether the Office of Fair Trading was right or whether the banks had a valid point when they said that these charges were clear, transparent, and were for services provided.

The long awaited High Court test case took place in January, and the presiding judge was Justice Andrew Smith. After the case, which lasted several weeks, the judge said that he needed time to deliberate before delivering a verdict. Three months later the judge delivered his verdict, and stated that he was ruling in favour of the Office of Fair Trading. However, whilst consumers may be pleased about this judgement there are a few important things to bear in mind.

Firstly, this is simply the first stage of the proceedings. This does not mean that banks now have to change their policies and reduce their charges. What is does mean is that the Office of Fair Trading has the right to assess banks’ terms and conditions, including these charges, for fairness, and can begin its overview of the charges immediately. However, once the OFT reached its decision with regards to the fairness of these charges the matter will have to go back to the High Court for another hearing. The assessment from the Oft is now expected in July.

Another thing to remember is that the banks have been given until 22nd May to appeal against the decision in the first stage of the proceedings, and until this time any cases that are already on hold will remain suspended. Many think that the banks will put up a fight, as otherwise they could be facing refunds of billions of pounds.

Officials from the British Banker’s Association said: ‘As previously agreed with the Financial Ombudsman Service and the FSA, customer complaints relating to unauthorised overdraft charges will currently remain on hold. The banks will continue to ask County and Sheriff Courts to keep cases relating to unauthorised overdraft charges on hold until the test case process is concluded.’

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