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In another chapter in the ongoing bank charging saga, some customers of NatWest bank have a new opportunity to reclaim their bank overdraft charges after a High Court judge has ruled that the bank’s terms and conditions, used from 2001 to July 2003, may have included unfair penalties for going overdrawn.

The ruling by Mr Justice Andrew Smith is one of a several in the long running test case on bank charges. Most overdraft claims in county courts have been halted since July 2007 while the High Court resolves the issue.

The Nat West website claims that, “the court found that a single historic NatWest term prohibited customers from using a card to go overdrawn but this does not mean that that term is a penalty.”

The consumers’ organisation Which? Says that in theory some NatWest customers could now ask the courts to reopen their claims, but warned it would not be plain sailing.

The point is that the judge has said the Nat West charges may be penalties, which gives grounds for appeals, but he did not say that they are penalties. The onus remains on the customer to demonstrate that the charges really are penalties and did not reflect the cost to the bank of administrating the overdraft.

Also, as the issue of charges reflecting the cost to the bank is part of the OFT’s ongoing fairness assessment, Nat West may be able to convince the court to stay any cases brought against it until the OFT’s investigation is complete.”

The banking industry and the Office of Fair Trading (OFT) are waiting for the Appeal Court to hand down its judgement on a bank appeal against an earlier ruling by Mr Justice Smith. Last year he dealt a blow to the right of banks to levy high overdraft charges when he decided that the 1999 regulations, regarding unfair terms in consumer contracts, gave the OFT the right to scrutinise those charges.

This week’s judgement by Mr Justice Smith was one of three residual decisions, made on whether or not charges levied under old or “historic” terms and conditions could also be penalties under common law, and therefore not recoverable.

Last October he cleared most of the old contracts used by seven banks and the Nationwide building society, who are the parties to the test case with the OFT. However he needed more time to consider some of the terms and conditions used in the past by the Abbey, Lloyds TSB and RBS NatWest.

This week he gave the first two of those banks the rulings they had been seeking; that their former current account conditions did not fall foul of common law. But he found against the NatWest.

The significance of the judge’s decision is that if a clause in a contract imposes an obligation not to do something – such as not going overdrawn on a current account without permission – then any money charged for breaking that condition must not be more than is actually necessary to compensate the bank.

That is because under common law it is illegal for any penalty charges or fees, imposed by a business, to be excessive.

Campaigners have argued that typically it does not cost a bank more than about £2 to tell someone they have gone overdrawn and to repay their unauthorised borrowing. In contrast, bank charges have sometimes been more than £30 each time a customer has gone into the red or had a cheque bounced.

The OFT and RBS group are now considering their positions pending finalisation of the order. This means either side could appeal, which might delay any attempt to start a case in the county courts.

Taken together with the earlier decision of Mr Justice Smith that the OFT has the right to examine bank charges this further ruling including Nat West’s terms and conditions for a certain period demonstrate that the case is going the right way for consumers. However, the interminable bank delaying tactics will continue for some time yet.

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HSBC is introducing new technology which will check every credit card transaction for fraud. The scheme will affect 10 million card accounts and millions of transactions. However, the banking industry has warned that more legitimate transactions will be queried or cancelled as a result.

But action needs to be taken. Card fraud is rising, up 14% in the first half of 2008, and fraud abroad now accounts for 40% of all card crime

Travellers are being advised to take several different payment methods, including cash, credit cards and travellers’ cheques when they go abroad.

After several years of falling numbers, card fraud started rising again in 2007. Latest figures show that card fraud could have exceeded £600m in 2008, and banks are using increasingly sophisticated systems to try to outwit fraudsters.

HSBC previously checked 25% of card transactions but is currently rolling out a system that means all card transactions will be screened in real time, with a decision made in a fraction of a second.

SAS UK, which is providing the software system for HSBC, say on their website, ´when you put your card in the machine it’s carrying out an automatic check against your pattern of normal use and making a decision about whether that is real or fraudulent.`

Banks are constantly battling with fraudsters to reduce the levels of crime. Card fraud is an arms race. The banks will come up with one way of dealing with it, the fraudsters will come up with a way round it.

The prime example is what we have seen with chip and pin. It was successful for 18 months, two years, but then the fraudsters have worked a way round it, so companies are now looking at more sophisticated means
However as the banks become more proactive in targeting fraudsters, more people could find their legitimate transactions are declined or queried.

Customers using their cards abroad are most likely to experience problems meaning that the first days of holidays are spent on the phone with banks rather than relaxing. If customers have relied on one means of payment the experience can be very stressfull indeed

Spending large amounts of money or using your card frequently can similarlay trigger the alarm at the bank.

As a recent victim of this type of crime (and also a very frequent traveller) I welcome this intiative. I arrived in Riga a few months ago and tried to draw some Lats out of a bank machine where my card was blocked. Then within minutes the fraud department at Barclays rang me up and established that it was me using my card an unblocked it

The simple fact is that the level of security we demand from the banks is so high that occassiaonlly we will inconveniance ourselves. However, limiting the accesss we have to our money briefly for security reasons is infinitely preferable to finding our money has vanished into the pockets of fraudsters.