Unfair charges? Carry on claiming

Unfair charges? Carry on claiming

Campaigners this week urged consumers to continue reclaiming "unfair" bank penalty charges after the Office of Fair Trading won the first round of its legal battle with Britain's big high street institutions.

On Thursday, a judge decided that the OFT can rule on the fairness of these charges - in particular, fees for unauthorised overdrafts and bounced cheques.

There will now be one or more high court hearings to discuss whether the charges are unfair and, if so, what a fair charge should be. But it could be a complicated and lengthy process, and the banks may well appeal.

While many thousands of people have already succeeded in getting payouts from their banks, things came to a halt last year when it was agreed that decisions on all customer claims would be put on hold until the outcome of the case. As a result, hundreds of thousands remain with their bank, the financial ombudsman or the courts, while the law is clarified.

The Financial Services Authority says that for now the "waiver" it granted, allowing banks to put off dealing with claims, will continue. However, it adds that it will be assessing "whether the waiver remains appropriate" going forward.

Doug Taylor at consumer body Which? says the banks have the option to appeal this week's decision. If this happens, the FSA waiver is likely to remain in place during the appeals process. "The FSA must now drop its waiver so that the thousands of cases pending in the county courts.....continued below

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and at the Financial Ombudsman Service can be processed," he adds.

Many campaigners say customers who have paid charges should carry on downloading template letters (from guardian.co.uk/money, among other sites) and writing to their banks to make sure their complaint is in the system. "It's crucial to start a reclaim now, as you can only go back six years (five in Scotland), and delaying may mean you lose the ability to get old charges back," said Martin Lewis at consumer revenge website MoneySavingExpert.com. He says more than 4.5m template letters have already been downloaded.

David Kuo at personal finance website Fool.co.uk, says it is "cruel" to make customers wait. He adds: "Customers who have been unfairly penalised should continue to reclaim unfair fees. There is a six-year limit for reclaiming the charges, though the clock stops the moment you lodge your complaint with the court. Customers should not delay."

As to how much people might get back, that will depend on the final outcome. Last year, many customers were winning payouts of several thousand pounds. In April 2007, NatWest paid £35,987 to a Norfolk businessman.

If the banks decide not to appeal, their terms and conditions will be assessed for fairness. Where current terms are unfair, the OFT will agree a regime with the banks - effectively placing a cap on the level of overdraft fees.

Billions of pounds are at stake. According to the OFT, the banks collectively receive up to £3.5bn in unauthorised overdraft fees each year - the equivalent of about £10m a day. They charge up to £39 for a bounced cheque, standing order or direct debit, and critics of the system say this does not reflect the actual cost incurred by the banks, which could be as little as £2.

guardian.co.uk © Guardian Newspapers Limited 2008