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This page is intended as a quick introduction to the recent history of Bank Charges and how they stand legally.
Bank charges (specifically Unauthorised Overdraft Charges and Returned Standing Order Charges) have come under scrutiny in recent times, they are viewed by most as punitive and so not enforceable under UK law.
The reasons for this are simple, the charges are highly unlikely to reflect the actual costs incurred by the bank as a result of your lack of funds. The banks (it is suspected) make a profit from each and every one of these charges, and figures released in 2006 certainly seem to support this.
The banks argue that the charges are set out in their terms and conditions, however the opposing argument is that the terms are in violation of the Unfair Terms in Consumer Contracts Regulations (UTTRs) and so are null and void. The main point of this argument is that they pose a significant disadvantage to Consumers (which given the cost of signifcant charges is a theory I support).
In July 2007 the Office of Fair Trading commenced a High Court Test case with a number of the biggest banks in the UK. The banks have agreed to abide by the outcome of the test case, but applied to the Financial Services Authority (FSA) for a waiver on the normal timelines of dealing with complaints related to bank charges until the test case is complete. The FSA granted this waiver, which for the consumer means that the banks do not have to deal with your complaint until the Test Case is complete, which is expected to last a minimum of 6 months.
The Financial Ombudsman Service (FOS), the FSA and the courts have agreed not to pursue any cases until the outcome of the case is know, with the exception of cases that fit the exceptions set down by the FSA. The main one to note is Cases of Genuine Financial Hardship, however there are a few other exceptions.
It is interesting to note however that many courts in the UK have not been granting the stays requested by the Banks. They are not bound to do so, and are able to make the decision based on individual cases, this at least provides a tool for consumers to reclaim their charges and hopefully maintain the balance of their finances whilst the test case continues.
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This page is intended as a quick introduction to the recent history of Bank Charges and how they stand legally.
Bank charges (specifically Unauthorised Overdraft Charges and Returned Standing Order Charges) have come under scrutiny in recent times, they are viewed by most as punitive and so not enforceable under UK law.
The reasons for this are simple, the charges are highly unlikely to reflect the actual costs incurred by the bank as a result of your lack of funds. The banks (it is suspected) make a profit from each and every one of these charges, and figures released in 2006 certainly seem to support this.
The banks argue that the charges are set out in their terms and conditions, however the opposing argument is that the terms are in violation of the Unfair Terms in Consumer Contracts Regulations (UTTRs) and so are null and void. The main point of this argument is that they pose a significant disadvantage to Consumers (which given the cost of signifcant charges is a theory I support).
In July 2007 the Office of Fair Trading commenced a High Court Test case with a number of the biggest banks in the UK. The banks have agreed to abide by the outcome of the test case, but applied to the Financial Services Authority (FSA) for a waiver on the normal timelines of dealing with complaints related to bank charges until the test case is complete. The FSA granted this waiver, which for the consumer means that the banks do not have to deal with your complaint until the Test Case is complete, which is expected to last a minimum of 6 months.
The Financial Ombudsman Service (FOS), the FSA and the courts have agreed not to pursue any cases until the outcome of the case is know, with the exception of cases that fit the exceptions set down by the FSA. The main one to note is Cases of Genuine Financial Hardship, however there are a few other exceptions.
It is interesting to note however that many courts in the UK have not been granting the stays requested by the Banks. They are not bound to do so, and are able to make the decision based on individual cases, this at least provides a tool for consumers to reclaim their charges and hopefully maintain the balance of their finances whilst the test case continues.
Next Article
