Bank Charges Update

On the 28th April 2008, The Office of Fair Trading (OFT) won the test case to establish whether bank charges for unauthorised overdrafts comes under ‘unfair contract’ rules designed to protect the public. While this is good news for consumers – especially those reclaiming unfair bank charges – it does not mean the case is closed. With up to £3.5bn made by banks each year on overdraft charges – account holders generally pay up to £38 for exceeding their limit – banks are sure to fight to the bitter end.

In January 2009, The Financial Services Authority (FSA) announced that the waiver currently keeping your unfair overdraft claims on hold has been extended until end of July 2009.

Back in the summer of 2007, the Office of Fair Trading began court action against banks on the grounds that overdraft charges were inflated above actual service costs but as the court case has yet to be concluded, the FSA has extended the waiver until later this summer.

People wishing to reclaim unfair bank charges have become increasingly frustrated over the length of time the court case have dragged out, but with millions of pounds in compensation at stake for each bank, their resistance is somewhat understandable.

The waiver, or stay on all claims, means that it remains unclear how banks should deal with compensation claims “consistently and fairly,” according to Dan Waters, FSA director or retail policy.

The Financial Ombudsman Service has agreed not to act on consumer complaints while the waiver remains in place and similarly count courts have had compensation cases put on ice – unless you are in financial hardship. If the situation changes, the FSA can lift the waiver at any time.

Are bank charges legal?

This the burning question which a high court test case aims to answer. An earlier judgement by Mr Andrew Smith ruled that charges can be investigated by the OFT under consumer contract regulations. The court of appeal is expected to rule on that judgement by April.

Can I still make a claim?

At present, the Financial Ombudsman Service (FOS), or county courts would not support a claim for compensation and banks would not be obliged to handle your complaint. As are result, we are not able to recover the £100s or even £1000s due to you at present unless you are in financial hardship.

The FSA has warned banks that if they fail to live up to the conditions set out in the waiver, waiver would be revoked.

Under the waiver, a person claiming fees back is considered to be in financial difficulty if their income is “insufficient to cover reasonable living expenses and meet financial commitments as they become due”.

The good news is the extended waiver means your claim for compensation can be extended over a longer period. You can reclaim charges backdated six years but because the waiver was introduced in July 2007, you can reclaim overdraft charges as far back as July 2001.

If you currently have unmanageable unsecured debts such, such as an overdraft, store cards, credit cards and loans, a debp plan or  IVA could  help.

We do not provide any professional services directly,  our aim is to provide answers to 99.9% of the questions you will have regarding all aspects of debt management before you make any major decisions and we do this by providing detailed information in our free reports and a free telephone consultation from an approved advisor.

To talk to our approved debt specialists who are fully licensed Insolvency Practioners (IP’s) and offer a full range of solutions please telephone 0800 014 7863 or complete the short online application on the left and the advisor will call you back.  There is no cost for this call and no obligation.