Bank’s Shock Win at Charges Battle
By Simon Read
A shock ruling at the Supreme Court in London today (25
November) looks to have dashed the hopes of millions of people planning to claw
back excessive bank charges.
To the surprise of many, the High Street banks won their
appeal against the Office of Fair Trading’s (OFT) challenge to high levels of
unauthorised overdraft charges. In short, the Supreme Court has ruled that the
Office of Fair Trading doesn't have the right to investigate whether the charges
are fair.
Millions unlikely to get bank charges refunded
Which? chief executive Peter Vicary-Smith said: “This is a
bitter blow for the millions of people who have been patiently waiting to get
their bank charges back.”
The test case had been brought jointly by the OFT and Abbey,
Barclays, Clydesdale, Halifax Bank of Scotland and Lloyds TSB, which are now
part of the same group, HSBC, Royal Bank of Scotland and Nationwide Building
Society.
It followed an OFT investigation in 2008, which concluded
that “unarranged overdraft charges are difficult to understand, not transparent,
and not subject to effective consumer control”.
The Supreme Court unanimously ruled in favour of the
seven major banks and the building society - which must have led to a collective
corporate sigh of relief at them not having to stump up an estimated £1billion
in refunds if they had lost the case. But Lord Phillips, president of the
Supreme Court, left the door open for the charges battle to continue. He said:
"It may be open to the Office of Fair Trading to assess the charge under other
criteria."Lord Walker, one of the five Justices of the Supreme Court who heard
the case, added Parliament “may wish to consider the matter further”.
Two year battle comes to abrupt end
The row has rumbled on for more than two and a half years and
centres around charges of as much as £35 for a bounced cheque or returned
payment. The bank’s critics say the actual cost of returning a cheque or
refusing to make a payment is nearer £2.50. During the course of the
investigation, banks have paid out around £560million to customers who
complained about excessive charges, for fear that they would lose the
battle.
The British Bankers' Association was quick to welcome the
ruling, saying: “The Supreme Court has today confirmed that the banks'
unarranged overdraft charges are an important part of current account services
which the banks provide to their customers and that the amount of those charges
is not assessable for fairness.”
Next steps for the OFT
So what’s next? The OFT said it would consider the judgment
before making any decisions on where to go from here. “The OFT will now consider
the detail of this judgment before it makes a decision on whether or not to
continue its investigation into unarranged overdraft charging terms,” a
spokesman said. "It will also explore with others the implications for consumers
and for existing and future legislation and regulation.”
The OFT said it expects to make a further announcement in
December. Meanwhile, for people who have been waiting to reclaim bank charges,
the waiver set in place by the Financial Services Authority to halt any more
claims or payments from the banks, has now been lifted, opening the door for
anyone who has suffered from rip-off charges to make a complaint.
Is it worth making a complaint?
It looks unlikely
at the moment that complaints will result in compensation being paid out by
banks and the million or so who have already complained but have not yet had a
payout may also end up empty-handed. An alternative may be to vote with your
feet and move your account to another bank. But make sure you choose a bank with
low charges or few fees.
Anyone angry at how they have been treated by their
bank can make their feelings known by joining the Britain Needs better Banks
campaign, run by Which? at www.bnbb.org.