Bank charges in the UK.
Bank charges for unauthorised overdrafts in the UK are rather excessive. For example, I have been once charges 35 pounds for a 4 pounds unauthorised overdraft and lately 35 pounds for going 10 pence overdraw for 9 hours (from midnight to 9am).
Some might argue that when people opened a bank account they agree for this kind of charges. However, I opposed strongly this reasoning. Indeed customer does not have the choice every banks in the UK are charging astronomic fees for unauthorised overdraft there is no choice there. Some might also argue that you should not put yourself in such position. I agree, however things like that might happened and therefore we should be entitled to expect some common sense from bank. Does a 35 pounds charge, for a 10 p overdraw for 9 hours does not sound excessive?
Many sound to think so and since 2006, people have gathered in association and issue proceedings against their bank. In early 2007, the County Courts and the Financial Ombudsman Service received tens of thousands of complaints that these charges were unfair.
In March 2007, Following this avalanche of complaints the OFT (Office of Fair Trading) announced a formal investigation into the fairness of unauthorised overdraft and returned item fees (referred to as 'unauthorised overdraft charges'). This followed on from the OFT's initial review of such charges, where the OFT concluded that it shared the public concern about the level and incidence of bank current account charges.
In July 2007, the OFT announced that, in agreement with seven major banks, a test case will be launched in the High Court to decide once and for all whether bank charges can be claimed back.
At the same time, the FSA (Financial Services Authority) announced that until the conclusion of the bank charges test case, the banks could put a hold on dealing with bank charge claims. From there, the Financial Ombudsman had also putting a hold on all the bank charge claims they were currently dealing with, and the courts had putting a hold on all the bank charge claims currently in the court system, until the results of the test case.
In April 2008, a High Court judge has ruled in favour of the Office of Fair Trading and gave the OFT the authority to decide itself if the charges are unfair, and the power to force the banks to change their practices as a result.
Following this decision banks reaction were drastically different. For example, Barclays Banks decided to reduce its unauthorised overdraft charges from £35 to £22 and bring in a 'personal reserve' buffer of £250 on average above customers' agreed overdraft limits. Therefore, from now Barclays customers are being charged for an actual overdraft extension - a service - and not for the bank's time. When Barclays was trying to sidestep the criticism of unfairness charge, Bank of Scotland appointed debt collectors to chase a customer who had contested charges imposed when he accidentally went into the red. A mistake of course!
What is going to happen next? There will probably be an appeal by the banks against the OFT's initial High Court victory in April that ruled that the OFT can assess whether fees are unfair. Another High Court hearing is expected to start in the New Year on the issue of whether or not bank overdraft charges are unfair.
How these affect the customer? It is quite simple. Customer can still claim charge back and because the banks now cannot use the 6 years rule to get out of paying claims delayed by the hold on claims, it is important to do so now!
At least I will...
Some might argue that when people opened a bank account they agree for this kind of charges. However, I opposed strongly this reasoning. Indeed customer does not have the choice every banks in the UK are charging astronomic fees for unauthorised overdraft there is no choice there. Some might also argue that you should not put yourself in such position. I agree, however things like that might happened and therefore we should be entitled to expect some common sense from bank. Does a 35 pounds charge, for a 10 p overdraw for 9 hours does not sound excessive?
Many sound to think so and since 2006, people have gathered in association and issue proceedings against their bank. In early 2007, the County Courts and the Financial Ombudsman Service received tens of thousands of complaints that these charges were unfair.
In March 2007, Following this avalanche of complaints the OFT (Office of Fair Trading) announced a formal investigation into the fairness of unauthorised overdraft and returned item fees (referred to as 'unauthorised overdraft charges'). This followed on from the OFT's initial review of such charges, where the OFT concluded that it shared the public concern about the level and incidence of bank current account charges.
In July 2007, the OFT announced that, in agreement with seven major banks, a test case will be launched in the High Court to decide once and for all whether bank charges can be claimed back.
At the same time, the FSA (Financial Services Authority) announced that until the conclusion of the bank charges test case, the banks could put a hold on dealing with bank charge claims. From there, the Financial Ombudsman had also putting a hold on all the bank charge claims they were currently dealing with, and the courts had putting a hold on all the bank charge claims currently in the court system, until the results of the test case.
In April 2008, a High Court judge has ruled in favour of the Office of Fair Trading and gave the OFT the authority to decide itself if the charges are unfair, and the power to force the banks to change their practices as a result.
Following this decision banks reaction were drastically different. For example, Barclays Banks decided to reduce its unauthorised overdraft charges from £35 to £22 and bring in a 'personal reserve' buffer of £250 on average above customers' agreed overdraft limits. Therefore, from now Barclays customers are being charged for an actual overdraft extension - a service - and not for the bank's time. When Barclays was trying to sidestep the criticism of unfairness charge, Bank of Scotland appointed debt collectors to chase a customer who had contested charges imposed when he accidentally went into the red. A mistake of course!
What is going to happen next? There will probably be an appeal by the banks against the OFT's initial High Court victory in April that ruled that the OFT can assess whether fees are unfair. Another High Court hearing is expected to start in the New Year on the issue of whether or not bank overdraft charges are unfair.
How these affect the customer? It is quite simple. Customer can still claim charge back and because the banks now cannot use the 6 years rule to get out of paying claims delayed by the hold on claims, it is important to do so now!
At least I will...