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Bank Charges Case Gets Underway
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(14-01-08) - The high court test case which could determine future charges for bank customers who go overdrawn without permission begins this week. writes Dan Drage dan.drage@consumerchoices.co.uk |
The Office of Fair Trading (OFT) will argue in the High Court that fees administered by several banks and one building society against customers who exceeded overdraft limits were illegal under contract regulations introduced in 1999.
If successful, the OFT action could bring about compensation for any individual who has been charged for improperly handling their account since 1999. Additionally, banks will lose a source of income worth about £10m a day and will have to absorb the costs of trawling through customer records. Overall, the banks stand to lose billions of pounds if defeated.
High street banks have put together an ensemble of top-ranked QCs to fight these claims, with the case set to begin on Wednesday. The defendants: Abbey, Barclays, Clydesdale, HSBC, HBOS, Lloyds TSB, Royal Bank of Scotland and the Nationwide building society, have lined up some of the City’s most prestigious firms and leading Queen’s Counsel to represent them.
Chris Eagle, Commercial Manager at CreditChoices, warns of bank retaliation if they lose this case:
'A win for the OFT equates to a win for the consumer, and this would be a great outcome. However, if the banks are defeated then they will have to alter their business model, and it’s a certainty that our days of ‘free banking’ will be well and truly over. Charges will be implemented for cash withdrawals and using cheques instead’
He continues:
‘A win for the banks though would be potentially more damaging, allowing them carte blanche to set unfair charges.’
The duration of this first hearing is expected to be eight days, with a judgment coming before Easter. However, given its public importance, the case is likely to go all the way to the House of Lords regardless of which side wins this round, with the loser eager to contest any outcomes.
The issue may not be resolved until next year.
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