Investor Today

News Story

Banks win fee charging case

Wednesday 25th November 2009

In a shock decision, the Supreme Court ruled in favour of the banking industry in a move, which will disappoint the eight million people who have had their applications for bank charge refunds frozen.

If the Office of Fair Trading had won the case, millions would have been in line for swift settlement of the charges.

Bank trade body, the British Banker’s Association said banks will work with the regulators to ensure that the outstanding customer complaints are brought to a swift conclusion.

“We will also continue to work together with the OFT in connection with its on-going Market study,” it said.

Which? chief executive, Peter Vicary-Smith, said: "This is a bitter blow for the millions of people who have been patiently waiting to get their bank charges back.
"Not only does it give banks licence to charge what they like for unauthorised overdrafts, but it could have ramifications for other areas of personal finance. The banks now have no excuse for introducing other fee charges.”

He added: "The banks have done everything possible to frustrate the OFT throughout this process. The OFT and the Government should now explore other avenues it can pursue to get a fair deal for consumers."

Moneyfacts spokesperson Michelle Slade said: "Consumers have seen billions of pounds pumped into a number of banks, but many feel they have seen little benefit. It seems surprising that making a GBP 35 charge for in some instances going a few pence overdrawn is not regarded as unfair."

She added that consumers may now not be in for bumper payouts, but in the wait for the result some banks have quietly been amending their charges to make them more transparent and proportionate.

"While the Supreme Court said the Office for Fair Trading (OFT) couldn't use the consumer protection rules to decide if bank charges are unfair, it did say the OFT could look at other legislation," she said.

The judge, Lord Phillips also ruled neither the seven banks and Nationwide or the Office of Fair Trading could appeal to the European Courts.

The decision follows two years of test case litigation and until now, the banks have lost at both the High Court and Appeal Court stages of the test case.
But the banks refused to give in, as about GBP 2.6bn of annual income is at stake.

Today, the OFT lost to the banks, which challenged it on a technicality, asserting that the independent consumer body does not have the powers it thinks it has.

The government is now a major stakeholder in two of the banks – RBS and HBOS - that won their challenge today.

The seven institutions involved also include Abbey, Barclays, Clydesdale, HSBC, Lloyds TSB and Nationwide Building Society.

View Comments 11 comments

Posted By M on Thursday 26th November 2009 12:06:13
Quite right. I do see why people who keep their accounts in order should pay for those who blatantly and freqently go overdrawn and wonder why when they are charged for the priviledge. The best policy is to adopt the Mr McCawber approach and only buy things when you have the money

Posted By lauren annies on Wednesday 25th November 2009 12:40:04
Unbelievable!!! o well at least the fat cats will get their disproprtionate pay rises AGAIN this year. i am a single parent, my bank NATWEST are VERY unhelpful and the money i consider they owe me was to pay for a holiday for me and my children next year. Let the banks take the karma on this one. i say again unbelievable!!!!!!!!!

Posted By Keith on Wednesday 25th November 2009 12:37:01
Maybe the judge was an ex-politition!! How can anyone of stable mind who has not recieved a back hander decide that a £35.00 fine is fair for being a few pennies overdrawn. Nothing surprises me with this bent country any more. Once again we can rely on our fair justice system to come up trumps.

Posted By Sarah Arrow on Wednesday 25th November 2009 12:23:13
This is quite disturbing. Even though there have been several cases where the fine is disproportionate to the level of the 'inconvenience' (sorry am struggling for a better word here) and they have been ordered to repay (Dunlop? case in the '70s springs to mind, that has been disregarded and banks are allowed effectively to fine their customers whatever they like... hmmm. I'd like to run my business like a bank, making and breaking the laws as a I go along.

Posted By Donna on Wednesday 25th November 2009 12:22:17
Absolute farce, 2 years to go in favour of banks that we are 'saving' during the recession. These people could not run a bath!

Posted By Terry on Wednesday 25th November 2009 08:41:36
Lets be honest would this have been the same result if the recession had not have hit home and the government did not have to bail the banks out with taxpayers money. £2.6billion is a lot when the banks havent got any spare cash

Posted By Mike Turner on Wednesday 25th November 2009 03:44:59
Terminal proof that "the law is for the poor and justice for the rich". I don't think even the Supreme Court really understandsthe "legal technicality" that meant the banks continued to challenge the OFT on this matter. The answer is in their Office of Fair Trading". Levying disproportionate charges for minor errors is one thing. But worse the banks have had and will continue to have the capacity to take their charges even if the customer disputes them. This is not a penal redress open to other organisations that might have charges built into their contracts. Surprise surprise there are few other organisations that have the power to fleece their customers or have as high a level of penalty charges. I can see two points for the rightful campaigners going forward. Firstly, the banks ignored the leave to appeal so the OFT should do the same and take it to the European Courts. Secondly, every bank customer for every future charge ever levied should ensure they kick up the biggest fuss they can to clog up the banks' complaints systems, then the FSA, then the FOS. As a last point, and I think the judges were implying this, there is some social payments ruling that state benefits cannot be used to pay for debts. Its obscure, but the way I interpret this is benefits are paid to sustain the individual and family in the basics of life. Excessive bank charges cannot be "basics of life". Primarily as most benefits are paid directly into a bank account there will be a definitive audit trail to show benefit monies were used to pay bank charges. Anyone on any form of benefit should refuse to accept the charges on this ground. a few test cases with sort this issue out. All in all, I think this is a shameful day for the greedy bankers, a weak and feckless government and a judical system that cannot interpret the common good and efficay of upholding the need for banks to be given a good wake up call that their engrained practises of stealing from their customers has to stop - and stop now.

Posted By Snoop on Wednesday 25th November 2009 03:19:24
The Goverment, Banks etc are all a bunch of "C U Next Tuesdays!!!!, thats all i have to say.

Posted By Ali on Wednesday 25th November 2009 02:52:12
And when a bank calls the police saying you have stuck your scooter in the doorway for 2 hours, when it simpley broke down as they would not get the ramp out. A security issue when only 2 members of staff on. So if they have all these fees cannot HSBC afford a ramp at its branches???????

Posted By Cathy on Wednesday 25th November 2009 02:24:41
What else did you expect? The government needs to find around 80 billion because of the banks and where do you think it is going to come from? Look out,because the british people will be paying it all! For a very long time!

Posted By John Burns on Wednesday 25th November 2009 01:43:24
Well what a surprise!! Now the government are stakeholders as well as us "the public" you could see this one coming. The judge is obviously in the pocket of the government. "Rip off Britain" This country has become farce!