The OFT accuses the banks of profiting from the charges they make when their customers use an unauthorised overdraft or a payment due to be debited from their account fails because of insufficient funds. As it is unlawful for the banks to profit from these charges they must defend their case on the basis that they represent a reasonable charge to cover the costs involved of processing failed payments and unauthorised overdrafts.
Before the court case began many customers had been claiming back their bank charges, going back for a maximum of six years. Online consumer websites provided customers with template letters so they could fill their details in and provide the bank with a detailed list of their charges. This resulted in a number of customers getting a refund of the charges they had made; this process was relatively straightforward for consumers with a UK bank. Sort codes and account numbers provided from the account being questioned and a list of charges that are being requested to be refunded are able to be inserted into the template letter. However, the banks made this payment as a gesture of goodwill incurring no liability. When the court case began all claims were put on hold, with the exception being those who could prove hardship.
The court case was resolved in favour of the banks in November 2009, when the Supreme Court ruled the OFT was not within its rights to judge the fairness of the charges.
The OFT had accused the banks of earning up to a third of the revenue from their current accounts and that they discriminated against consumers. They argued that going overdrawn by a few pounds and therefore being imposed a charge of up to £35 was unfair. The banks argued that this enabled them to offer free current accounts to consumers rather than imposing a monthly or annual fee.
The banks’ victory was followed by a statement from the OFT stating it still considered the charges to be unfair. They are still arguing for further changes, which may include working with the banks to come to some arrangement involving making the charges fairer, or more reflective of the actual costs that are meant to represent.
A number of options are available to achieve the changes the OFT wants to see. These range from voluntary action to a change in the law.
A statement was released by John Fingleton, chief executive of the OFT, in which he said: "The Supreme Court judgment was not the outcome we had hoped for and was disappointing for many bank customers. Having now considered in detail all the options available to us in light of the judgment, we have decided not to continue what would be a narrow investigation with limited prospects of success.
"We are committed to securing significant changes to unarranged overdraft charges going forward, whether through voluntary agreement with the banks or by other means. Customers can play their part by looking for value for money and switching accounts if necessary."
That doesn’t really leave a good taste in the mouth for those who had not yet reclaimed their bank charges, like this author! Just before the court case one of my friends received around £6,500 in reclaimed bank charges, so I was keen to say the least. If you do decide to shop around and switch banks, remember that UK bank sort codes are different for every bank and branch so your account number and sort code will both change.
