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Action dropped on bank charges
THE long-running campaign against unauthorised bank overdraft charges has suffered a major setback after financial watchdog the Office of Fair Trading gave up its legal battle.
The regulator said it would not be taking any further legal action against the banks over the charges after the Supreme Court ruled against it last month.
The OFT said it still had "significant concerns" about the personal current account market, and planned to discuss a range of options, from voluntary measures to legislative change, with banks and consumer groups.
Some consumer groups have vowed to fight on, believing there are legal grounds for a challenge in the courts, but the OFT admitted any investigations into the fairness of the charges would have "very limited scope and low prospects of success".
Chief executive John Fingleton said: "We remain deeply concerned that the market for personal current accounts is not working well for consumers and does not give banks sufficient incentives to compete.
"We are committed to securing significant changes to unarranged overdraft charges going forward, whether through voluntary agreement with the banks or by other means."
Banks earn around a third of their revenues for personal current account from unauthorised overdraft charges, which bring in around 2.6bn a year.
The OFT said the charges were "difficult to understand, not transparent and not subject to effective consumer control".
Customers who go into unauthorised overdraft or breach their agreed limit can be charged as much as 35 for a single bounced payment, although campaigners claim the actual cost to the banks could be as little as 2.50.
Last month the Supreme Court ruled that the charges did not come under the OFT's regulation under unfair contract rules.
The test case was brought by the OFT and seven banks and a building society after thousands of consumers started to reclaim the charges. The OFT will report on its progress on discussions with the banks by the end of March next year.
Campaigner Martin Lewis, founder of consumer website MoneySavingExpert.com, which urged people to reclaim the charges, said he would continue the fight to help consumers get their money back.
He said: "While the OFT may have thrown in the towel, no-one should think the fight is over.
"Bank charges are unfair, even the OFT said so, the problem is finding a law where fairness counts. Yet we believe the Consumer Credit Act (CCA) does just that."
He said he hoped to have new template letters enabling people to try to reclaim money under the CCA available by mid-January.
The chief executive of consumer group Which?, Peter Vicary-Smith, said: "Consumers have been left confused by this decision.
"It looks like the big refund war is over but there is a narrow possibility that some people might be able to claim back their bank charges. The situation needs clarification and we're looking into it as a matter of urgency."
The British Bankers' Association welcomed the OFT's decision and said the banks would continue to work with it in relation to the concerns it had raised as part of its market study.
The Government has also indicated it wants an overhaul of the system to ensure unauthorised charges are made fairer for consumers. It said it would work with the OFT and Financial Services Authority to create a new framework for the charges.
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Wednesday 08 February 2012
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