Now that both sides have been heard in the case of the Office of Fair Trading versus potentially unfair bank charges, it is up to the judge Mr Justice Andrew Smith to decide whether the charges are indeed unfair, and determine which side will emerge victorious.
Customers and banks alike both have a lot riding on the test case, as the banks have reportedly been making approximately £3.5 billion every year from charging their customers up to £40 a go for exceeding overdrafts, bouncing cheques and having insufficient cleared funds for Direct Debits.
If the OFT is successful and the high court rules that the charges are not in proportion with the crime, millions of customers will be able to claim back the charges that have been taken from their bank accounts over the last six years. Customers already claimed back £800 million before a freeze was put on further claims until a legal clarification could be reached.
A further £4.7 billion could be reclaimed if the court rules in favour of the OFT, but there are fears that an end to unfair bank charges
will also mean an end to free banking, because banks will look elsewhere to recoup their lost profits.
The eight banks which the OFT took to court – Abbey, Barclays, HBOS, Clydesdale, HSBC, RBS-Natwest, Lloyds TSB and Nationwide Building Society – maintain that the charges are fair and reflect the administration costs incurred by the bank when a customer breaks the terms and conditions of their account.
It is not thought that a decision will be easily forthcoming, with some pessimistically not expecting a resolution for some time. Even if the OFT wins this initial, hurdle, the banks can fight back by appealing the decision, which could take an additional 12 months.
The OFT is adamant that the charges be reduced under consumer protection legislation, specifically the Unfair Terms in Consumer Contract Regulations. The regulator believes that the current wording needs to be amended so that it is written in plain English, because the current format renders it impossible for even financial experts to understand, begging the question of how the average consumer will be able to fathom it.
© Fair Investment Company Ltd