What does the banks’ victory mean for you?
January 31, 2010
Last year banking customers, campaigners, and various industry groups in the UK received the news that they thought that they would not hear but had been dreading at the back of their minds. After nearly two years of legal battles and appeals it was announced that the banking industry had won the case into bank charges, which had been brought by the Office of Fair Trading.
Several years ago the OFT claimed that the charges that banks were applying to customers’ accounts for going over their overdraft limits, for bounced cheques, and for returned direct debits were unjust and unfair, because in many cases they were way higher than the actual costs incurred to the banks in terms of administration. Some banks were charging around £40 per fee, whereas the estimated cost to the bank was just a few pounds.
Many consumers managed to claim back bank charges that they had been forced to pay out, with many claiming for charges going back up to six years. However, in the middle of 2007 all further claims were frozen, as it was decided that the only way to resolve the argument between the OFT and the banking industry was to take the matter to the High Court, and the High Court battle commenced in January of 2008.
A final conclusion was reached earlier this year that ruled in favour of the OFT, and allowed the watchdog to scrutinise the terms and conditions of banks, which included bank charges. However, the banks decided to appeal against this, and the matter was referred to the Supreme Court. An announcement was then made earlier this week stating that the judges in the Supreme Court had indeed sided with the banks, and had therefore ruled in their favour.
This means that the millions of customers that have claims pending for the return of past bank charges will receive nothing, as the banks are now not obliged to return this money. Those that had already received a refund on bank charges will not have to repay the money because the refunds were made as a goodwill gesture by banks, according to reports. The ruling has come as a real blow to these millions of customers as well as to the OFT and the various consumer groups that had been backing the watchdog.
The banks had argued that these bank charges were the only reason that consumers in the UK were able to enjoy free banking, with the only fee-based bank accounts being packages accounts which offered a range of benefits to consumers who chose to take these out. The Supreme Court agreed that the fee free banking system was based on banks charging these fees, and added that when customers signed up for a current account they agreed to pay these fees when they signed the contract.
However, this may not be the end, as the courts have said that the OFT may be able to look at other avenues to question the validity of bank charges.
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