Unfair Banks Charges: The Latest
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The ongoing saga of banks charges is in the news again this week as the appeal case before the Law Lords comes to an end. Seven banks and one building society are trying to overturn two previous rulings that would let the Office of Fair Trading investigate their overdraft fees.
In all, nearly a million people have claimed for the return of their unauthorised overdraft charges but the cases are on hold and have been for some time. If the banks win this week’s appeal, these people are unlikely to get any money back.
If the banks lose, then the legal arguments should move on to an important stage, a case to determine whether these charges were fair or not. Only then will people have a clearer picture as to whether billions of pounds will be handed back to customers.
The OFT has said that it will still pursue bank overdraft charges as unfair, even if it loses the current legal appeal in the House of Lords.
The OFT argument is that bank customers were at a disadvantage at two separate stages, when they first opened an account and when they incurred the overdraft fees.
The Law Lords will now consider their judgement and may refer some issues to the European Court of Justice. That would further delay a final judgement on the OFT’s jurisdiction, in a legal process that started in July 2007.
At stake is the currently frozen ability of millions of customers to demand that their banks refund overdraft fees they consider too high. For the banks, an adverse judgement could lead to them repaying billions of pounds in past charges, and foregoing income of more than £2bn a year.
The banks argue that overdraft fees are part of the price paid by customers for having a current account, this leads to their arguments that if they are not allowed to levy these charges they may have to instead charge for current account facilities.
As I have said before on this blog I believe this to be an empty threat. There is enough competition in the UK banking market to ensure that current account charges are not feasible. The smaller and online banks would see this as a great way to challenge the market share of the large high street banks.
As ever with this story, no one should hold their breath. If the Law Lords pass the case on to the European Courts that will mean another year at least until a final decision and the banks will keep fighting all the way.
