The Office of Fair Trading
(OFT) is taking a case to the High Court to
decide whether or not the level of unauthorised
overdraft charges made by banks are legal.
According to the OFT, tens of thousands of
complaints that these charges are unfair have
been received by the County Courts and the
Financial Ombudsman Service.
The debate considers whether, under current
consumer law, it is lawful for banks to charge
a penalty for unauthorised overdrafts and ‘bounced
cheques’ in excess of the administrative
costs needed to process them. In many cases,
these penalties can be £30 or more for
each transaction which occurs whilst an individual’s
bank account is in the red. Consumer groups
argue that the actual administrative costs
involved are a fraction of the penalties.
As a result of high profile campaigns by consumer
groups, thousands of dissatisfied bank customers
have been sending their banks letters of complaint
demanding refunds. Some banks have settled
out of court rather than reveal the actual
cost of dealing with overdrafts and bounced
cheques.
There have been several cases where the courts
have found in favour of the bank which has
left the question of bank charges unresolved.
The OFT has entered into an agreement with
eight leading high street banks to bring a
test case to the High Court to resolve the
legal issues.
Until the case is settled, decisions on all
existing and future claims for refunds are
likely to be put on hold. Estimates for when
a case might be brought before the High Court
range from November 2007 to early spring 2008.
Internet Link:
OFT website
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