Breaking finance and business news, tax information, jobs and more for finance directors and senior finance professionals.

Economy

Bank charges test case to drag on

Wednesday, 23 January 2008

The legal battle between eight banking institutions and the Office of Fair Trading (OFT) is expected to be drawn out until mid-February.

The case, which started on 17 January, was intended to take eight days. It is more likely to continue into next month, however, due to the amount of material to be considered by the court.

The purpose of the application is to get a ruling on whether the provisions of the UTCCRs (Unfair Terms in Consumer Contracts Regulations) that deal with unfairness, apply to unauthorised overdraft charges, and will not address whether terms and conditions or specific charges of individual banks are unfair.

Justice Andrew Smith described the submitted evidence in court as an “enormous burden”.

Barclays, one of the lending bodies accused of hitting customers with unfair charges, argued the Office for Fair Trading (OFT) was not in the position to use the Unfair Terms in Consumer Contracts legislation to regulate their customer charges.

It told the High Court it was “throwing down the gauntlet” in the dispute against the OFT.

The lenders - Barclays, Abbey, Clydesdale, HBOS, HSBC, Lloyds TSB, Royal Bank of Scotland and Nationwide Building Society - maintain their stance that penalising customers as much as £38 on overdrawn accounts was completely within their right.

Barclays QC Iain Milligan refuted accusations made by the OFT that the way banks rewrite their terms and conditions, encouraged customers to commit criminal offences by knowingly writing cheques that went beyond their funds.

Although a win for the OFT would be a victory for customers in the short-term, financial expects are worried this could lead to banks reclaiming their lost profits by taking away free banking.

Related articles