The test case verdict went in favour of the OFT and could result in bank customers reclaiming bank charges worth millions of pounds. Before July 2007, some bank customers had successfully claimed back bank charges, whilst others were unsuccessful.
This inconsistent approach led to the OFT postponing all claims made over bank charges until the test case was completed. The verdict could have a detrimental effect on the seven banks involved (which were Barclays, Abbey, Clydesdale, HBOS, HSBC, Lloyds TSB, RBS and Nationwide Building Society) because they had previously raked in as much as £3.5 billion in charges each year.
The current economic climate is gloomy and recent weeks have seen banks forced to launch rights issue's due to low balance sheets and increased sub-prime debts. As it stands, if banks are forced to pay back the millions that customers are putting in claims for over charges, the credit crisis could be affected for the worse.
Until the case was settled, banks continued to charge over the odds for crimes as petty as going over an agreed overdraft by as little as £1 and charges can be more than £30 each time. As a result, there is a backlog of customers with claims pending who are expecting thousands back as a result of the test case verdict.
However, the Office of Fair Trading lead test case is not the end, other hearings are expected to follow to decide how much banks can charge and the banks involved could still appeal. As a result of the remaining uncertainty, pending bank charge claims remain on hold until more is certain.
The OFT filed the case because it was concerned that a charge of more than £30 for going over an agreed overdraft limit was unrealistic and unfair when administration costs can be as little as £2. Banks generally charge each time you exceed your limit, meaning if you pay for two separate items without realising it has taken you over the limit you could end up owing more than £60.
The case argued by many customers who are intent on reclaiming bank charges is that the speed at which bank charges added up was unfeasible. Some claimants have exceeded their limit by just £25 but the charges have added up to over £200. The OFT test case has ruled that bank charges come under Unfair Consumer Contracts rules, but whether or no claimants will be refunded and how much remains to be decided.
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Disclaimer: Paul McIndoe writes for a digital marketing agency. This article has been commissioned by a client of said agency. This article is not designed to promote, but should be considered professional content.