On April 24, a ruling in the ‘unfair’ bank charges test case gave the Office of Fair Trading (OFT) and consumers the upper hand against banks. However, confusion remains for many banking customers who are hoping to reclaim their bank charges.
The case was instigated by the OFT, which believed customers were being overcharged for account infringements, for example having a cheque bounce. While minor breaches could cost some banks as little as £2 to sort out, some have charged customers up to £40 in bank charges. It is estimated that bank charges bring in approximately £3.5 billion per year for the banks.
So the decision may have drawn a sigh of relief from many customers who have felt the bank charges to be unfair. Thousands reclaimed bank charges before the case began, and thousands more now hope to see the ‘disproportionate’ fees refunded.
However, although Mr Justice Andrew Smith decided that the Office of Fair Trading now has the right to determine whether or not default bank charges are unfair and should be reduced, it could take a while for any money to be returned to consumers.
Banks are entitled to, and are fairly likely to, appeal the decision, as refunding the charges – which they claim are fair and proportionate – stands to cost them dearly. This could seriously delay the reclaiming process.
The Financial Services Authority decided to freeze bank charges claims last year until a final decision was made in the case. However, many customers are preparing or have already submitted claims so that they will be dealt with quickly if the charges are found to be unfair.
According to uSwitch.com, claims from approximately one million customers worth around £713 million are currently waiting in the county courts pending a decision. Many more are expected to join this number should a ruling be made in their favour, and consumer groups are urging customers to submit claims as soon as possible to avoid being caught in a major backlog.
