OFT abandons bank charges fight
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The Office of Fair Trading has decided it will not pursue the case against unfair bank charges as it believes there would be “low prospects of success”.
The Supreme Court last month found that unarranged overdraft charging terms in the contracts considered can not be assessed in full under the unfair terms in consumer contract regulations.
The OFT says: “After detailed consideration of the judgment and of the various options available to it, the OFT has concluded that any investigation it were to continue into the fairness of current unarranged overdraft charging terms under the UTCCRs would have a very limited scope and low prospects of success.
“Given this, it has decided against taking forward such an investigation.”
The OFT says it still has significant concerns about the current accounts market.
It says fundamental changes are still required for the market to work in the best interests of bank customer and points out that banks earn around a third of their current account revenues from unarranged overdraft charges that are difficult to understand, not transparent and not subject to effective consumer control.
The OFT says a number of options are available to secure the changes it wants to see, ranging from voluntary action to legislative change.
It will now be discussing these issues intensively with banks, consumer groups and other organisations, with the aim of reporting on progress by the end of March 2010.
Chief executive John Fingleton (pictured) says: “The Supreme Court judgment was not the outcome we had hoped for and was disappointing for many bank customers.”
He adds: “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.”
Moneysupermarket.com head of banking Kevin Mountford says: “There’s a sense of inevitability about this climb down by the OFT after it lost in the Supreme Court last month.
“Whilst this is a blow to the millions of people who are trying to reclaim overdraft charges from their bank, in truth the OFT’s campaign has actually forced the banks to cut their charges already, so millions of customers will be better off in future.”
He adds: “For those who are still trying to reclaim charges the OFT has left the door open for them to take the banks to the Financial Ombudsman and no doubt some will choose to pursue this, but many are likely to quietly drop their complaints.”
CMS Cameron McKenna head of retail banking Jean Price says: “This is very good news for the banks and for the millions of people who never incur charges. Customers opening a bank account should realise that charges are part of the package. Given the competitive market, consumers should shop around and actually read the information provided by the banks to ensure that they know the costs involved and find the account that suits them best.”
Liberal Democrat leader Nick Clegg says his party will continue to fight unfair bank charges.
He says: “This is extremely disappointing and a blow for millions of bank customers. Having come so close to overhauling an unfair system of charging that penalises vulnerable groups of people, I know that the campaign will not just stop.
“The Liberal Democrats will continue the fight for fair bank charges in Parliament and push for a change in the law if necessary so that high street banks cannot keep ripping off their customers.”
Which? chief executive Peter Vicary-Smith says some people might still be able to claim back bank charges, but warns consumers to avoid claims chasers.
He says: “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. We’ve been fighting against unfair bank charges for many years and will continue to try to get redress for consumers.
“Meanwhile, people should sit tight and avoid claims handlers, who’ll charge a large fee for doing something you could do yourself.”
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Readers' comments (4)
Anonymous | 22 Dec 2009 11:20 am
I think that in the light of what has happened with the court case, banks should be made to disclose to the public just how much it actually does cost them for a customer to go into unarranged borrowing, and make all banks justify their bank charges and then refund the difference to all customers that have been unlucky enough to receive bank charges. There is no doubt that the banks knew they were ripping customers off or they would'nt have cut the charges for going overdrawn. I also think that someone in the government should also speak up for the customers and ensure that all these charges or part of are refunded to everyone. After all, all of us who have had bank charges are just paying for the bonuses of greedy bank managers. So everyone that is owed money for bank charges write in to gordon brown tell him we are fed up with being robbed and give us are money back or else dont vote for him
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John Blackmore | 23 Dec 2009 0:01 am
I think that in the light of what has happened Financial Advisers should be made to disclose to the public just how much it actually does cost them to provide advice, and make all Advisers justify their charges and then refund the difference to all clients that have been unlucky enough to receive Adviser charges. There is no doubt that the Advisers knew they were ripping customers off ....
What has the cost of a service got to do with anything ? Also I don't know of anyone who was forced to go overdrawn.
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Anonymous | 23 Dec 2009 12:13 pm
The banks no doubt have much to answer for, and their lending policies have often been less than prudent. However, this case is confined to one issue only - whether they are right to impose substantial charges on customers who borrow banks' money without authority. In most other spheres of activity, 'borrowing' without consent can attract severe consequences - including civil and even criminal liability.
The banks offer overdraft and other loan facilities, at profitable rates that are nevertheless sufficiently competitive to attract customers. They have control over the extent of their arranged lending. It is not surprising if they impose hefty charges both to cover all the cost implications of unauthorised borrowing and to discourage the practice. People who borrow without first obtaining the lender's consent - or who exercise so little control over their finances that they overdraw without realising it - have little cause for complaint when they are charged for the full cost, including an element of commercial profit for the provider.
Having said that, one would expect the banks to exercise discretion in cases of unintended and non-negligent overdraft.
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raj sodha | 6 Jan 2010 4:31 pm
Had the OFT won the case, it would have brought those greedy banks to their knees after paying millions back in excessive charges (these were excessive - fact that they have reduced charges recently meant that they were previously charging more and will continue to do so if they can get away with it) so to keep the peace and not make the banks bankrupt!, the decision makers came up with a solution - allow the banks to do what they have been doing and those who persue the claim will be allowed to continue persuing the claims. They know that mostly people are lazy by nature and as a result most people will give up and not claim! Carry on banking charges!!!
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