Bank charges hit Brits for as much as £2.5billion each year

07 July 2008 / by Rebecca Sargent
Unauthorised overdraft charges are hitting Brits for as much as £2.5billion a year, the Office of Fair Trading (OFT) is expected to announce later this month.

The statistics provided to the OFT by the banks involved in the investigation reportedly show that the banks under investigation made £2.5million profit from unauthorised overdraft charges in 2006. And, if the OFT wins its court case against the high street lenders, they could end up paying back more than £10 billion.

The investigation began in July 2007 when the OFT launched proceedings in the High Court against nine banks, including Barclays, Abbey, Lloyds TSB and HSBC. The test case aimed to decide whether or not unauthorised overdraft charges could be potentially deemed unfair.

Consequently, in April this year, the High Court confirmed that the OFT's view of unauthorised overdrafts can be looked into and the bank charges can be assessed for fairness.

However, the judgement is being appealed by the nine banks, some of which are reportedly ready to take their appeal to the European Court of Justice. The next phase of the case began today and will see Mr Justice Andrew Smith investigate whether bank charges over the last six years can be contested due to their validity as a penalty.

The OFT has reportedly chosen such a long, methodical process in the investigation of current account overdraft charges because it wants to be thorough and ensure a fair ruling is made.

However, as the banks involved continue to pursue an appeal in denial that charges of up to £35 could be deemed 'unfair', the case looks set to continue well into 2009.

Meanwhile, hundreds of thousands of Brits continue in attempts to reclaim unfair bank charges, despite the fact that the process has been put on hold until the case is decided - although applications are being accepted, nothing is being processed.

© Fair Investment Company Ltd