OFFICE OF FAIR TRADING HAS NO JURISDICTION TO INVESTIGATE BANK CHARGES


In a previous news item we summarised the findings of the Court of Appeal in Office of Fair Trading –v- Abbey National Plc and Others; (Judgment published 3rd March 2009).

In a landmark ruling on 26th November 2009, the five Judges of the Supreme Court unanimously held that the OFT does not have authority to determine the fairness of bank charges including unpaid/paid item charges, overdraft excess charges or guarantee paid item charges generally levied where a customer has insufficient funds in his account to make a payment.

The decision has divided opinion. Politicians and consumer groups have expressed considerable dismay at the ruling and have demanded changes in the law. Compare on the other hand the views of the millions of bank customers who avoid incurring excess bank charges by remaining in credit and thereby receive free current account services plus interest. Had the Supreme Court upheld the lower Court’s decision an estimated refund in excess of £10 billion in lost revenues to the banks would have ensued, leading to the probable global introduction of monthly banking charges to all bank customers.

Nevertheless we believe that most observers would agree that a charge of up to £35.00 to the customer for (say) an inadvertent slip into the red of a couple of pounds is clearly outrageous where the administration costs to the bank would be as little as £2.50.

Sarah McCarthy-Fry, Exchequer Secretary to the Treasury, has said:-

“We are examining options for a compulsory system alongside discussion with the banks. The bottom line is that we need a system of charges that is more proportionate and more transparent, so that the fees are fair and people are clear about what they are signing up to.”

We will have to wait and see.