Reclaim Unfair Bank Charges

The Supreme Court has today ruled in favour of the banks regarding the bank charges test case, which has been ongoing since 2007.

Following a two year legal battle, the court’s decision will come as a blow to campaigners and consumers who had hoped to claim back charges dating back to 2001.

It had been estimated that if the banks had lost, they would have been forced to pay back billions of pounds to their customers.

However, it had been suggested that if the Supreme Court had ruled in favour of the OFT, then the banks may have begun charging customers for other services such as using cash machines.

In his report, president of the Supreme Court, Lord Phillips noted “that in the absence of the charges the banks would not be able profitably to provide current account services without a fee”.

Commenting, Peter Vicary-Smith, chief executive at Which? said: “This is a bitter blow for the millions of people who have been patiently waiting to get their bank charges back.”

Despite the court’s ruling, Kevin Mountford, head of banking at moneysupermarket.com, does not believe today’s decision will be the “end of the story”.

“We expect the OFT to continue to try and press for a system where the costs of running the current account system are spread more fairly across all customers,” which he believes the banks have already begun to do.

“We’ve already seen a big move from banks towards so-called packaged accounts where you pay a monthly fee but get added benefits such as travel insurance thrown in.”

“We expect this trend to continue and in return for fairer overdraft charges banks could introduce transaction fees, or monthly and annual fees,” he added.

Banks could be about to charge customers to use their cash machines if they lose the bank charges test case tomorrow.

According to reports in the Daily Mirror, banks are considering imposing charges on all cash machines should the Supreme Court rule in favour of the Office of Fair Trading (OFT).

So far it has been estimated that 12 million people have been hit with unauthorised overdraft charges since 2001, but around eight million people are yet to put in a claim.

The test case has been ongoing since 2007 following various appeals by the banks that charges should not be governed by the OFT.

If the Supreme Court rules in favour of the OFT, the banks could be forced to pay back billions.

However, despite the Supreme Court offering the last chance of appeal, it has been predicted that the banks will again try to delay the proceedings further.

Commenting, Phil Jones, personal finance campaigner at Which? said: “With so much money at stake, the banks may well try to drag the process out even longer, so we’d warn people not to make any plans for their refunded cash just yet.”

Banks could be flooded with a further eight million bank charges claims, as the decision regarding the test case is fast approaching, consumer group Which? has said.

With the Supreme Court’s judgement expected on Wednesday, Which? has claimed that of the 12million people that have been hit with bank charges for unauthorised overdrafts since July 2001, 63 per cent have not yet asked for their money back.

If the Supreme Court rules that bank charges should be governed using fairness rules, the banks may be forced to pay back billions.

Which? has found that 42 per cent of the claims waiting to be resolved are for amounts of £500 or more, as four out of 10 people who have made a claim said they would use the money pay off bills and debts.

Commenting, Which? personal finance campaigner, Phil Jones, believes that if the Supreme Court rules against the banks, it could leave them “staring down the barrel at millions of fresh claims”.

“This is in addition to the huge backlog that’s already built up since the waiver was put in place,” he said.

However, Mr Jones added: “With so much money at stake, the banks may well try to drag the process out even longer, so we’d warn people not to make any plans for their refunded cash just.”

A decision date for the bank charges test case has been announced by the Supreme Court.

The judgement will take place on Wednesday 25 November, with the court’s decision expected at around 9.45am.

Martin Lewis, creator of MoneySavingExpert.com who has campaigned for overdraft charges to be assessed using fairness rules, said: “After nearly two and a half years, it looks like we’re about to get a firm result.

“The High Court and Court of Appeal have ruled and it’s to be hoped the Supreme Court continues to stick up for the million plus people with reclaims on hold and follows their ruling.”

The case has been ongoing since the banks have continued to appeal the decision of the High Court and the Court of Appeal, which could change the way bank charges are handled for good.

At present, if the court rules against the banks, the Office of Fair Trading will be able to reassess bank charges using these rules. However, Mr Lewis urged caution saying there is nothing stopping the banks from challenging the decision and “dragging the whole thing on for years more”.

“The real hope of a quick solution is for political intervention after this result, to get a negotiated settlement,” he added.

The ongoing bank charges test case is expected to be concluded within the next few days and could, depending on the Supreme Court’s decision, force banks to payback up to £20billion in ‘unfair’ overdraft fees, the Money Mail has revealed.

After two years, the case between the UK’s leading banks and the Office of Fair Trading (OFT) is now in its final stages as both parties await the Supreme Court’s verdict.

With the newly formed Supreme Court replacing the House of Lords as the highest court in the land earlier this month, it will now decide whether it is right that the OFT has the power to judge bank charges using fairness rules as the first test case verdict ruled back in April last year, before the banks chose to appeal the decision.

Commenting on the bank charges case that could leave banks billions of pounds out of pocket, Tony Hazel at the Daily Mail, said:

“Our information is that the Financial Services Authority has asked for details of charges going back to 2001. This implies that the banks may be forced to repay any unauthorised charges going back a full eight years.”

Mr Hazel believes the implications of the court ruling in favour of the OFT would be “stunning”.

“We estimate that the total bill could be close to £20billion if the banks are forced to repay every customer every penny they are owed,” he said, before suggesting “this could seriously strain the finances of some of the biggest semi-nationalised banks.”

Leading high street banks such as Lloyds and RBS, both of whom are still feeling the effects of banking crisis could, depending on the Supreme Court’s decision, find themselves in an even more vulnerable position.

Prime Minister Gordon Brown has stated that the ongoing bank charges case needs a “negotiated solution” and that any compensation that is due should be paid “as swiftly as possible”.

The bank charges test case between the UK’s leading banks and the Office of Fair Trading which began back in 2007, is now awaiting the House of Lords’ decision, following the banks appeal against the decision that fairness rules will be used to govern bank charges.

Responding to a campaigning letter sent by Moneysavingexpert.com’s Martin Lewis, Mr Brown has called on the banks and regulators to, “explore a quicker way to resolve this without delay”.

Mr Brown continues: “People need confidence when they open an account, they will be treated fairly, charges and fees will be transparent and reasonable, and their savings will be safe.”

Mr Brown’s letter follows replies from conservative leader David Cameron and liberal democrat leader Nick Clegg regarding Martin Lewis’s campaign to get fairer bank charges for consumers.

Prior to the House of Lords making a final decision, a number of banks including Halifax, Bank of Scotland, NatWest and RBS, have already announced reductions in their bank charges, which Mr Brown has welcomed.

Explaining the government’s plans to help improve the current banking crisis, Mr Brown added: “We are now taking extensive action to reform the banks’ culture, to stop irresponsible banking practices, and to support more effective consumer education and information so that people can get a better deal.”

Royal Bank of Scotland and NatWest has announced they will be cutting their unauthorised bank charges from October 1.

The bank charge cuts will mean the fee for returning a cheque, direct debit or standing order reduced from £38 to £5, while the charge for paying for an item on an unauthorised overdraft will be halved to £15 a day.

The move by RBS, who also control NatWest, comes despite a number of banks including RBS and NatWest, and the Office of Fair Trading awaiting an appeal decision by the House of Lords for the ongoing test case.

Pleased with the announcement, Brian Hartzer, CEO of the Group said: “This is good news for customers, not least because the fees for unarranged borrowing have been an area of ongoing concern for them.

“As we look ahead there are many issues to consider, but we thought it was time to move this particular customer concern forward by cutting our charges.”

According to Louise Bond, personal finance expert at uSwitch.com, this should encourage other lenders to do the same, she said: “As the first providers to step up to the plate and do the decent thing before the outcome of the test case, we eagerly await the other banks to follow suit.”

Peter Vicary Smith, chief executive of consumer group Which? has also welcomed the news, he said: “This is a step in the right direction and a victory for consumer pressure.”

However, he added if RBS and NatWest wanted to fully satisfy their customers, “they should admit defeat in the bank charges test case and repay the millions of pounds Which? believes they’ve been unfairly taking from their current account holders for years.”

Tory leader David Cameron has said that victims of ‘unfair’ banks charges should be paid back “quickly and fairly” if the test case finds in favour of consumers.

In an email to bank charges campaigner MoneySavingExpert.com’s Martin Lewis, Mr Cameron said they should not second guess the courts decision but if the decision goes against the banks then customers should be compensated automatically.

And he has now asked his Shadow Treasury Team to investigate the automatic bank charges system with Martin Lewis.

In his email, he said: “”I’ve asked my Shadow Treasury Team to look at your suggestion that banks should pay money back automatically if the courts do rule that the charges are unfair.

“They will be in touch with you to take this forward and go through the details.”

The bank charges test case began back in 2007, and despite a court ruling saying bank charges can be governed under fairness rules in April 2008, the case now awaits the House of Lords decision to the banks’ appeal which is expected to be made this autumn.

Responding to David Cameron’s email of support, Martin Lewis said: “While the court case and the OFT are looking at current charges, there’s been no mention of whether a system to payback those who’ve had their money taken unfairly will be set up.

“Here David Cameron states clearly that he believes it should happen, which should lift the spirits of all those reclaiming.”

If an automatic payback system is approved, according to Mr Lewis, consumers could have up to £10billion worth of bank charges returned to them, but without it this figure could be reduced to between £2billion and £3billion.

Having already written to Liberal Democrat leader Nick Clegg, Martin Lewis has said he will now write to Gordon Brown asking for his support over the automatic payback campaign.

Bank charges set by banks for unauthorised overdrafts have angered Liberal Democrat leader Nick Clegg who believes bank charges ‘must be cost based’.

Responding to comments made by Martin Lewis of MoneySavingExpert.com, the Liberal Democrat leader said: “The treatment of charges by the banks borders on the scandalous. It is a continuation of a protected industry seeking to maximise profits by exploiting the weakness of individual consumers who lack information and sophisticated knowledge of products or legal advice.

“The principle should be established that bank charges must be transparent and cost based.”

Before the test case between the Office of Fair Trading (OFT) and the UK’s leading banks began in 2007, Martin Lewis has been speaking out against unfair bank charges.

The case has now reached the House of Lords, where banks are appealing the decision that bank charges can be judged using fairness rules, with a decision expected in the Autumn.

Mr Lewis has called for banks to repay all ‘unfair’ bank charges if they lose and Nick Clegg has pledged his party’s support for this idea.

He said: “This struck me as an extremely good idea that we should do all we can to put in place. Vince Cable, my shadow Chancellor, and I would be delighted to support your campaign.

Mr Clegg added his party would be putting a motion before Parliament setting out its support for Mr Lewis’s idea as soon as the recess is over.

He hopes this move will “put pressure on the government and the banks to act to return the money they so unfairly took from customers”.

The bank charges test case between leading UK banks and the Office of Fair Trading (OFT) continues today in the House of Lords.

The case is now in the hands of the House of Lords after it decided that the banks could appeal the decision made by the Appeal Court in February this year.

Back in February the Appeal Court decided that bank charges for unauthorised overdrafts can be investigated by the OFT under fairness regulations.

However, the banks appealed this decision, maintaining that their bank charges have always been fair, reasonable and perfectly legal.

A decision is expected by the House of Lords over the next few days, which could make all the difference to the estimated one million consumers with bank charges claims currently on hold.

Commenting on the ongoing test case, Which? chief executive Peter Vicary-Smith said: “It’s disappointing that nearly two years since this saga began, little has changed for the millions of consumers being hit with these charges.”

Despite this, consumers are urged to continue filing their bank charges claims, Bradley Askew, managing director at specialist claims firm Claims Financial said:

“We continue to encourage consumers to lodge their bank charges complaints, and remain confident that the House of Lords will do the right thing.”