Member Article

Office of Fair Trading drop bank charges test case

The Office of Fair Trading (OFT) has announced it will not take any further action against unauthorized overdraft charges.

It is the first time the OFT has set out its intentions after the Supreme Court ruled the charges do not come under the OFT’s regulation, and it has been reported the there will be no further action against the banks.

The OFT did, however, say it still had “significant concerns” over the way banks operate current accounts, and a “fundemental change” was needed.

In a statement, the regulator said: “The OFT has concluded that any investigation it were to continue into the fairness of current unarranged overdraft charging terms under the Unfair Terms in Concumer Contract Regulations (UTCCRs) would have a very limited scope and low prospects of success.

“Given this, it has decided against taking forward such an investigation.”

Martin Lewis, creator of MoneySavingExpert.com, which ran a campaign encouraging people to reclaim the charges, said: “We know the OFT thinks the charges are unfair because it provisionally said so.

“The only issue is finding a law that allows the OFT to make a judgment on fairness.

“We believe there are regulations that could allow this: Regulation 5 of the Unfair Terms in Consumer Contracts Regulations, and Section 140 of the Consumer Credit Act. These laws even put the burden of proof on banks to prove fairness.”

The overdraft charges generate around £2.6bn of revenue each year for banks, helping to subsidise free banking.

However, the customers who breach their agreed limit can be charged £35 or more for a single bounced payment, with campaigners saying it costs the banks as little as £2.50.

The High Court test case was brought by the OFT along with seven banks and a building society after thousands of consumers started to reclaim the charges.

Despite the ruling, the Government has indicated it will ensure the system of unauthorised overdraft charges is made fairer in the future.

This was posted in Bdaily's Members' News section by Ruth Mitchell .