OFT launches test case on unauthorised overdraft charges
Retail banks face legal ruling on unfair bank charges
The UK Office of Fair Trading (OFT) has begun proceedings in the High Court claiming that unauthorised overdraft charges are unfair to consumers. The OFT believes the unfairness rules of the Unfair Terms in Consumer Contract Regulations applies in these cases, and is seeking to establish this legal principle in court. Aside from its belief that such charges are unfair, the OFT decided to act now because it found it was not able to secure voluntary compliance.
The motion is hotly contested by UK retail banks – namely Abbey National, Barclays Bank, Clydesdale Bank, HBOS, HSBC, Lloyds TSB, Royal Bank of Scotland and Nationwide Building Society. However, regardless of the tens of thousands of claims banks have received over unfair bank charges, they have usually settled rather than forcing the matter to court.
The test case will force clarity on the issue once and for all. While the case is ongoing, the UK Financial Services Authority (FSA) has allowed banks to suspend dealing with any claims for repayment of overdraft charges filed against them until a decision has been made. But the banks will be required to retain a log of any complaints made in the interim, and will be forced to honour any settlements made before the FSA’s waiver was announced.
The test case complements the OFT’s ongoing market study into personal current accounts, which addresses wider questions about competition and price transparency in the provision of personal current accounts that was announced in March 2007. The OFT will continue to work closely with the Financial Ombudsman Service and the Financial Services Authority, in addition to consulting with banks and consumer groups. It will publish its findings by the end of the year.
Should the OFT be successful, it could mean the end of free banking, as banks attempt to recoup costs from elsewhere.
Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.
To access these options, along with all other subscription benefits, please contact info@risk.net or view our subscription options here: http://subscriptions.risk.net/subscribe
You are currently unable to print this content. Please contact info@risk.net to find out more.
You are currently unable to copy this content. Please contact info@risk.net to find out more.
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. Printing this content is for the sole use of the Authorised User (named subscriber), as outlined in our terms and conditions - https://www.infopro-insight.com/terms-conditions/insight-subscriptions/
If you would like to purchase additional rights please email info@risk.net
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. Copying this content is for the sole use of the Authorised User (named subscriber), as outlined in our terms and conditions - https://www.infopro-insight.com/terms-conditions/insight-subscriptions/
If you would like to purchase additional rights please email info@risk.net
More on Regulation
One year on, regulators still want a cure for bank runs
Broad support for higher outflow assumptions on uninsured deposits, but that won’t save insolvent banks
Watchlist and adverse media monitoring solutions 2024: market update and vendor landscape
This Chartis report updates Watchlist monitoring solutions 2022 and focuses on solutions for sanctions (name and transaction) screening and monitoring adverse media and its related elements
Basel Committee reviewing design of liquidity ratios
Focus on LCR and NSFR after Silicon Valley Bank and Credit Suisse, but assumptions may not change
Risk, portfolio margin, regulation: regtech to the rescue
A white paper outlining the complexity of setting the course for risk, margin and regulation
Prop shops recoil from EU’s ‘ill-fitting’ capital regime
Large proprietary trading firms complain they are subject to hand-me-down rules originally designed for banks
Revealed: the three EU banks applying for IMA approval
BNP Paribas, Deutsche Bank and Intesa Sanpaolo ask ECB to use internal models for FRTB
FCA presses UK non-banks to put their affairs in order
Greater scrutiny of wind-down plans by regulator could alter capital and liquidity requirements
Industry calls for major rethink of Basel III rules
Isda AGM: Divergence on implementation suggests rules could be flawed, bankers say
Most read
- Basel Committee reviewing design of liquidity ratios
- Breaking out of the cells: banks’ long goodbye to spreadsheets
- Too soon to say good riddance to banks’ public enemy number one