House of Lords decides on bank charges

Tuesday, 23 June 2009 09:04

Millions of bank customers could be line to receive refunds on unauthorised bank charges, as the House of Lords rules on banking fees.

Five law lords today will start hearing evidence in a case between the Office for Fair Trading (OFT) and a group of banks led by Abbey over whether the watchdog can rule if charges are fair.

Last year the OFT estimated the banks make £3.5 billion a year from unauthorised overdraft fees.

At a time when banks are recuperating from the loss, if the decision goes against them it could prove another financial shock.

The first stage of the case focuses not on if the overdraft fees are fair or not - but if the OFT can decide on their fairness.

In February, the Court of Appeal ruled in favour of the OFT that unarranged overdraft fees can be assessed for fairness under Unfair Terms in Consumer Contracts Regulations (UTCCRs).

However, the banks are appealing this.

A spokesperson for the OFT explained the verdict from the House of Lords is not expected until the autumn.

"If the court upholds its previous decisions, it could ultimately go to Europe," she said.

As the case has gone on a number of current account providers have tightened and clarified their charges, as well as introducing more paid-for accounts.

During the case, which has been running over a series of appeals for over two years and since July 2007 all complaints via the courts or the Financial Ombudsman Service have been on hold under a waiver from the Financial Services Authority.

Before July 2007 it is estimated almost £800 million in refunds had been paid by the banks over overdraft charges.

Campaigners Legal Beagles - using Ministry of Justice data - estimate a minimum of 65,000 cases are now on hold in the courts.

Further claims are held and are also frozen by the Financial Ombudsman Service and are resting with the banks themselves.

The OFT has already started investigations into a number of banks over their fees as it tries to reach a conclusion on whether fees are fair.

As the case goes on - and the prospect of further appeals remain - customer who have been charged for unauthorised fees are advised to keep on submitting their claims, so they can be dealt with once a final decision is made.

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