News In Focus
27 July 2007
OFT test case to examine fairness of bank charges
The Office of Fair Trading (OFT) is to launch a test case in the High Court in London to establish whether or not unauthorised overdraft charges levied by banks are fair.
The OFT is challenging eight of the high street banks - the Clydesdale, the HBOS group, the Royal Bank of Scotland group, Abbey National, Barclays, HSBC, Lloyds TSB and the Nationwide Building Society - over the charges, which were recently cut from around £30 to £12 following pressure from the OFT among others.
While organised groups of customers have since brought many actions in the lower courts for refund of charges paid at the higher rates, these have generally settled without a judgment, and no legal precedents have yet been set.
The OFT said that a quick determination of the point of principle would assist in securing a clear, orderly resolution of the fairness of the charges.
Until the case is resolved, the Financial Services Authority (FSA) has issued a waiver allowing banks to suspend the handling of complaints about unauthorised overdraft charges. All existing and subsequent complaints will be recorded by the banks, but potential refunds will not be paid out.
Angela Knight of the British Bankers Association said her members had always been convinced of the fairness of the charges and the court case would clarify the issue for banks and customers.