Daily Mail

Consumer campaigners want the Financial Services Authority (FSA) to crackdown on banks who have sent in debt collectors after customers who have disputed unfair overdraft charges.

These customers have had their complaints shelved for two years by the banks because of a waiver authorised by the FSA.
This waiver has left thousands of current account customers who disputed rip-off bank charges stuck in limbo, while racking up fees and interest.

Some are being chased through the courts, hounded by debt collectors and are having black marks put on their credit history.

The waiver was put in place by the FSA on July 27, 2007. Initially, it was for just 12 months while a court case between the banks and the Office of Fair Trading (OFT) was argued.

However, almost two years later, this case is still being fought, despite High Court and Appeal Court judges ruling the OFT can decide on whether bank charges are a breach of unfair contract terms.

Next Tuesday will see the latest twist in the saga as the banks take their case to the House of Lords. The result of this is not likely to be known for several months at best. This will pile on the misery for customers who have racked up thousands of pounds worth of charges, which they claim had sent them massively overdrawn.

Marc Gander, from the Consumer Action Group, says: 'It is the banks that sought the shelter of the FSA and wanted the waiver to be placed on complaints and it is the banks who wanted to contest the charges in the court and get a legal ruling on them.

'It is unacceptable that they should be involved in litigation against their customers and chasing them for charges that are in dispute when they have acknowledged there has been no decision on whether the charges are lawful.'

Banks have to resolve cases where there is financial hardship.

Under the terms of the waiver, banks can still look at complaints, but they choose not to.

The British Bankers' Association insists it is within its rights to pursue customers who have not repaid debts.

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Rip-off banks face being forced to pay refunds totalling more than £10billion to customers following a landmark court victory.

The High Court has ruled the Office of Fair Trading (OFT) has the right to decide whether charges of up to £38 for busting overdraft limits are unfair.

The decision clears the way for the OFT to rule that millions of Britons have been overcharged for going overdrawn or bouncing a cheque.

In theory - assuming the banks do not appeal to the House of Lords - refunds dating back at least six years could be reclaimed.

The news was welcomed by campaigning consumer groups as a victory for ordinary people.

However, some fear the banks will retaliate by imposing charges on all current account customers - ending the current model of supposedly free banking.

The decision by the High Court is a vindication of attempts by the OFT to curtail excessive bank charges.

It comes on the heels of the Daily Mail's Fair Play on Charges campaign, which has highlighted sky-high bank charges and helped thousands to claim refunds.

The consumer group Which? called on the banks to start paying refunds with immediate effect.

Chief executive Peter Vicary-Smith, said: 'The courts have made it clear the banks should now throw in the towel.

'This case has been going on too long and it's about time they tried to regain some of their dignity and paid customers their dues.

'This whole saga has severely damaged the banks' reputations. If they try to appeal in the face of such a clear decision, they will suffer further losses in the court of public opinion.'

The banks have generated big profits by issuing warning letters linked to overdrafts and bounced payments - each charged at £25 - like confetti.

Anger has been fuelled by reports that people, including students and pensioners, have been hit with bills of £100 or more after just going a few pence into the red.

The OFT calculates that banks and building societies have been making £2.6billion a year from unfair and excessive overdraft charges.

The High Court case has delivered a day of reckoning that means as many as 10 million people will be entitled to a refund, generating a total bill likely to top £10billion.

Such a huge bill would be a hammer blow to the banks which are reeling from multi-billion pound losses linked to reckless borrowing and expansion.

Martin Lewis, founder of the consumer revenge site MoneySavingExpert.com, said: This is a fantastic day for bank charge reclaiming. All gates to victory have now been unbarred.'

He said it now only requires the OFT to make a ruling that the charges are unfair - a decision expected later this year - in order to trigger a tidal wave of refund claims.

There are millions of claims already in the pipeline at banks and building societies. Currently, the firms currently have the right to put a hold on settling them until the legal case is concluded.

However, consumer experts said it would be wise for people to make their refund claims as early as possible to ensure they are among the first in the queue for a pay-out.

Advice and template letters on how to make a claim are carried on the Daily Mail's sister website Thisismoney.co.uk.

OFT officials have made clear that the banks would have no reason to use the loss of the court case as an excuse to start imposing monthly fees on current accounts.

However, many analysts feel that the banks will simply ignore this stance.

Michelle Slade, of the website Moneyfacts.co.uk said: 'Penalty charges are a significant revenue stream for the banks, which they can ill afford to lose at the moment. If the OFT does move to force the banks to lower charges, we could see increased costs elsewhere.

'The option that some banks may now levy an account fee is a real possibility.'

Kevin Mountford, head of banking at moneysupermarket.com, said: 'It seems the end of free banking could well be nigh.

'If banks have to reduce penalty charges they are likely to introduce a regular charge on current accounts, thus mirroring the system used most consistently across the world.'

Such a system could involve a monthly fee to cover a fixed number of direct debits, cheques and cash machine withdrawals. Customers would then be charged additional fees if they go above this number.

The British Bankers' Association gave no indication as to whether its members will appeal against the High Court ruling.

It said: 'These are important points of law. The courts can now go on to clarify the fairness of charges.

'Before that can happen the OFT has to provide the courts with its views on how charges should be assessed.'

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The Royal Bank of Scotland will refund millions of pounds in 'unauthorised' overdraft charges if it loses the current High Court test case, it has confirmed.

An internal document seen by the BBC reveals that the bank is drawing up contingency plans in case the current legal proceedings go against it.

In it, the group acknowledges that if it loses the case, it may have to refund 'millions of pounds worth' of past charges.

RBS, which includes NatWest, is one of seven banks and a building society that jointly brought a test case to the High Court with the Office of Fair Trading over unauthorised overdraft charges.

A judge ruled in April that the fees levied by the banks were subject to regulation by the OFT, paving the way for a second hearing into whether the charges are unfair and what a fair charge would be.

The banks have since appealed the judgment.

The RBS document says a team from the bank is 'preparing systems and processes to pro-actively refund charges to the group's customer base'.

It adds: 'All customer accounts that are due a refund will be calculated as accurately as possible' and 'any monies will be accurately accounted for and reconciled'.

But an RBS spokesman stressed that the document related to contingency planning in line with a commitment the banks have made to City watchdog the Financial Services Authority, and it did not reflect its expectations of the outcome of the case.

He said: 'This planning has absolutely no bearing on how we see the outcome of the test case.

'Along with the other banks, we agreed with the FSA back in July 2007 to deal 'efficiently and swiftly' with customer complaints on conclusion of the test case, irrespective of its outcome.

'Given the size of our organisation, complying with these requirements demands careful contingency planning and this document merely confirms that RBS is taking its obligations in this respect seriously.'

RBS has so far refunded £119 million to people who have complained to it about unauthorised overdraft charges.

The FSA has granted a stay on outstanding claims until January 26 next year, and it is expected to continue extending it until the end of the case.

Fees for people who go into unauthorised overdraft or who breach their agreed limit can be as much as £35 for a single bounced payment, although campaigners claim the cost to the banks could be as little as £2.50.

If it is upheld, the judgment could cost banks £2.6 billion a year in lost revenue and lead to them having to make refunds of up to £1 billion at a time when they can ill afford it.

Members of the industry have also warned that losing the case is likely to lead to the end of free banking in the UK, with consumers instead having to pay a monthly fee or a fee for every transaction they carry out.

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