New legal advice could mean millions in unfair bank charges could be clawed back

News - Banking

Written by Ray Clancy

Friday, 26 February 2010 09:40

There is still up to £480 million of unfair bank charges to be paid back by banks despite a Court test case ruling last year that went against consumers, it is claimed.

According to MoneySavingExpert.com, which championed the consumer point of view, new legal arguments could help even although the Office of Fair Trading’s test case against the banks failed on a technicality.

It is launching a new bank charges legal guide aimed at helping consumers. ‘Rumours of the death of bank charges reclaiming have been greatly exaggerated. Certainly, the number of people who can do it has decreased as it’s now mainly for those people suffering financial hardship. But with current economic conditions, that is sadly still a huge number of people,’ explained Martin Lewis, creator of MoneySavingExpert.com.

‘We now believe nearly half a billion pounds more could come back from the banks if people take them on again in the right way and we’re already hearing of good numbers of successful reclaims since the Supreme Court decision,’ he added.

Examples from the MoneySavingExpert.com Forum include gingerUK, who said: ‘I got a letter from Abbey dated 3 December 2009, saying that it has looked at my claim and taken into account my hardship, and as a gesture of goodwill will be refunding overdraft charges of £1,270’.

Another, annieredhead, said: ‘I received two letters today, one offering me £3,006 and one offering £249, for my two accounts. I can hardly believe it and am still shaking. Needless to say I will accept and should have the money in my account next week.’

‘The £35-a-pop charges for going beyond authorised overdraft limits, bouncing cheques or direct debits, are unfair. They’re designed to entrap and stack charges on charges, leaving banks raking in billions of profits. This isn’t just my view; the Office of Fair Trading (OFT) provisionally said it thought they were unfair too,’ said Lewis.

‘The problem is finding a law where fairness matters. The OFT tried in a test case, beating the banks in the High Court, then the Court of Appeal, yet last November a shock Supreme Court judgement ruled, on a niche technical decision, these charges didn’t need be fair, at least under that specific law,’ he added.

To try and take things further the company engaged a top banking QC to examine new legal arguments. As a result it may be possible to argue fairness under the Consumer Credit Act that states the relationship between lenders and consumers must be fair. The legal advice is that it’s for the bank to prove it is, rather than the consumer proving it’s not.

But Lewis added that this legal advice is still untried in the courts although already one court in Scotland has accepted amendments to the template letters based on this argument.