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This is Money - Bank charges blow as FSA upholds waiver
Bank charges claimants have been hit by a fresh blow after the financial watchdog upheld the waiver allowing institutions to delay claims over 'unfair fees'.
The Financial Services Authority has said its waiver granting banks and building societies the right to postpone dealing with bank charges claims will continue until the test case brought by the OFT is decided.
The case, due to begin in January next year, aims to deliver a decisive answer on whether bank penalty charges incurred for unauthorised overdrafts are unfair and illegal under consumer law.
In evidence submitted last week, the OFT attacked banks' arguments that unathorised overdraft charges were for a service and accused them of using unclear terms and stealth to profit from people's debt.
Today, FSA chiefs said a review found its waiver was operating effectively and that institutions were dealing fairly with those in financial hardship – who are still entitled to claim.
The review's findings will disappoint campaigners who have been arguing for the removal of the waiver, claiming banks have been using it to avoid even discussing potential refunds of fees on accounts when mistakes have been made.
Meanwhile, claimants in financial difficulty have said banks are refusing to hear their cases and those who won claims by default before the announcement of the test case in July have complained banks are refusing to pay up.
Banks have also been refusing claims on credit card charges and business bank account charges, despite the waiver only covering personal current accounts.
Clive Briault, FSA managing director, said: 'The test case between the OFT and the firms is a crucial step in establishing certainty about the legality and fairness of unauthorised overdraft charges.
'When this certainty has been established complaints about unauthorised overdraft charges can be dealt with consistently and fairly.
'The waiver we granted in July allowed firms to put complaints about unauthorised overdraft charges on hold until these complaints could be dealt with consistently and fairly.
'But it was important to review the operation of this waiver to ensure that it was working as intended. Our thorough review shows that it is appropriate for the waiver to remain in place.'
The waiver was granted on 27 July, after the announcement of the OFT test case against Abbey, Barclays, Clydesdale, HBOS, HSBC, Lloyds, RBS and Nationwide. It postpones firms dealing with charges complaints, bank charges court proceedings in the UK and Financial Ombudsman reviews of cases. The test case will begin in January next year.
This is Money - No reclaimed charges until summer 2008
Savers fighting for a resolution to the controversy over unfair bank charges may have to wait into the middle of next year before they see a return of their money.
Banks at the centre of the controversy over unfair fees will not be able to reach a compromise that will satisfy the Office of Fair Trading (OFT) before it takes them to court early next year - scuppering any chance of an early release of saver's funds - according to a senior banking figure involved in the OFT's consultation on the issue.
The OFT recently stated it could drop the High Court case it is bringing against eight High Street banks at the beginning of next year for allegedly overcharging customers on overdrafts, if the banks themselves put forward a solution to the issue.
Andy Bayes, Alliance & Leicester's head of current accounts, was one of the first individuals to be contacted over a month ago in the OFT's industry-wide consultation on how banks that charge allegedly unfair overdraft fees should be treated.
He can see no solution until mid 2008.
He said: 'I don't think they (the OFT) have clarity of what they want to do yet and I will be surprised if they come out with a clear statement before Christmas.
'If they don't have an idea now after looking at this for nine months, you have to wonder how long into next year is it going to take them to be definite? You could be looking at half-way through the year.'
A&L, which is not one of the eight banks being brought to court, provided its own solution to the issue of overcharging to the OFT. This is believed to be related to an overhaul of its own charging structure, which it will announce later this week.
Baynes said in his submission that any solution to the issue will not meet all the OFT's stated objectives of having an industry-wide template on charging that promotes more competition, is more transparent and less complex.
Transaction-based charges for overdraft facilities proportionate to the size of the overdraft are probably the fairest solution, he said, but these are extremely complex, as evidenced by bank charges in Australia.
For example, if you created a large unauthorised overdraft, you would therefore have to pay a relatively high fee.
But this may also lead to lengthy, complicated statements similar to those seen in the mobile phone market, which chart each transaction and how much you have been charged.
This is Money - Lloyds alert on bank fees
Thousands of Lloyds TSB customers could find themselves paying more for going overdrawn despite the bank's recent promise to reduce the cost of unauthorised borrowing.
Last week, Lloyds TSB said the unauthorised overdraft rate would fall from 29.8% to between ten and 20% from November 2.
The penalty for bounced or returned cheques will also be cut from £35 to £20.
But experts have warned that some consumers could end up paying even more under the new system.
Those who exceed their overdraft face a penalty of £30, with a maximum of three charges a month. This will be replaced by a monthly penalty fee of £15, plus a daily charge of between £6 and £20, depending on the size of the overdraft, up to a maximum of ten days.
Consumer watchdog Which? says: 'These charges appear excessive. If you go over by £100 in the course of a month you could end up with total fees of up to £200.'
HSBC, Abbey and HBoS have all reduced overdraft charges following pressure from consumer groups.
This is Money - Banks juggle fees for going into the red
Four High Street banks have overhauled their charges in response to consumer pressure over unfair overdraft fees.
Abbey this week became the latest bank to offer a new deal to those who dip too far into the red.
This follows moves by Halifax/ Bank of Scotland, HSBC and Lloyds TSB. Alliance & Leicester is expected to be next.
The Office of Fair Trading has revealed that banks take £3.5bn in charges.
Tens of thousands have demanded rebates through the courts and the Financial Ombudsman following Money Mail's Fair Play on Charges campaign.
A new version of the Banking Code is being published soon which could call for fairer treatment for those who accidentally go over their overdraft limit.
Many of these changes directly answer demands Money Mail has made over the past two years. But some are backward steps.
Here, we explain and analyse what the banks are doing...
ABBEY
Anyone going above their agreed limit will pay a £25 monthly fee plus a tiered fee of between £5 and £35 per transaction, depending on the amount.
The charge is linked to the size of transaction, though anything over £30 is charged at a flat £35. The fee is charged even if the transaction is declined.
Abbey says it limits the number of charges, though it is not disclosing them publicly.
Previously, it charged a £20 monthly fee for going above your agreed limit, plus £30 for the transaction that took you over and any subsequent payments.
There was also a £35 fee for a rejected transaction.
Verdict: Two steps forward, but one back. Charges should be lower for smaller transactions, but higher for larger ones.
HALIFAX/BANK OF SCOTLAND
The bank has stopped levying charges on charges. Anyone who goes over their agreed limit because of a £39 charge for a rejected transaction will not be hit by the standard £28 penalty simply for having an unauthorised overdraft.
However, if someone goes above their limit because of a transaction, they will still get hit with a double whammy: a £30 fee transaction fee, plus the £28 fee for being overdrawn.
A £39 buffer zone for cash has been axed, but the bank says a cash withdrawal cannot now take you over your agreed limit.
From later this year, customers will be told of charges 14 days before they are applied, rather than the current seven-day time-frame.
Verdict: The longer notice of charges and the decision not to apply charges on charges directly answer our demands. But at £39, Halifax still has the highest fee of any major bank.
HSBC
Customers taking cash from an HSBC hole-in-the-wall will, from October 1, be warned, via an on-screen message if the withdrawal could take them over their agreed limit, which will lead to a charge.
Verdict: This is another of our demands satisfied, but customers should still be wary when using other ATMs.
LLOYDS TSB
The £35 charge for a bounced transaction will be cut to £20 from November 2. Lloyds will also axe the £30 per day charge (capped at three per month) for unauthorised overdrafts.
Instead there will be a £15 per month charge, plus a tiered fee of between £6 and £20 per day, depending on how deeply in the red you are. Unauthorised interest rates are 29.8% but will reduce to 19.3% on the Classic account and 18.9% on the Classic Plus.
Account holders will be able to receive text alerts if they are near their limit or over it. The service will be free until the end of the year and then £2.50 a month.
Anyone who accidentally slips into an unauthorised overdraft will not incur any charges if they contact the bank before 3.30pm that day to extend their overdraft, deposit cash or make a transfer from another Lloyds account to cover the difference.
Verdict: This adds confusion to already complicated charges. Those who slip a small amount into the red may pay less, but the longer you are overdrawn and the more money you take out, the more you will be charged.
The text message service will help people avoid some fees, but the charge for the service is another nail in the coffin of free banking.
This is Money - Lenders charge for debt advice
Mortgage lenders are hitting struggling borrowers with exorbitant fees for advice on handling debt. But independent advice is free from charities.
The UK's largest lender Halifax charges £100 for debt counselling, as does GMAC-RFC. Nationwide charges £95, Lloyds TSB £94 and Abbey £80. Northern Rock says its charge is 'variable'.
Critics have accused lenders of driving those in trouble further and further into debt.
Indebted borrowers are already having a tough time. Bank of England base rate has risen by
1.25% from 4.5% to 5.75% over the past 13 months, creating a huge payment shock for the two million borrowers coming off cheap fixed rates deals over the next 18 months.
The number of homes repossessed by lenders has soared by 30% over the past year due to high arrears, with 14,000 repossesions taking place in the first half of 2007. Anyone struggling with repayments should contact charities such as Citizens' Advice which does not charge for debt help.
The advice is also impartial and can help you manage all your finances. On the other hand, a lender-appointed counsellor will only discuss the mortgage.
Moira Haynes, from Citizens' Advice, says: 'Insisting that people see a debt counsellor appointed by their lender and then charging them a hefty fee for the privilege is just a recipe for driving people deeper into debt.
'It's bad practice and should be stamped out. Banks and other lenders should instead be urging customers with credit debt or mortgage arrears to get free and independent debt advice.'
Lenders say their counselling services are not compulsory and they are only offered as a last resort. However, some lenders are more sympathetic. Accord Mortgages, part of Yorkshire Building Society, charges nothing, while Barclays and RBS/ Natwest refer borrowers to debt charities.
Debt counselling fees are just some of the exorbitant charges levied by mortgage providers against hard-up borrowers highlighted in a damning report by price comparison site Moneysupermarket.com.
Others include a £35 fee from Halifax for every call or letter regarding arrears, and a £55 fee from Northern Rock for anyone three or more months in arrears. Northern Rock also charges a whopping £1,400 to repossess a property, change the locks, insure it and then sell it.
Louise Cuming, from Moneysupermarket, says: 'People struggling to make repayments are particularly vulnerable, and it is important lenders treat their customers fairly.
This is Money - Freeze charges, judge tells bank
A judge has ordered Barclays to freeze the penalty charges and interest on the account of a customer who has sued the bank for their return.
The BBC reported today that Judge Abrahams, at Luton County Court, forced Barclays to stop applying any more charges until a High Court test case settles the legal issues involved.
Barclays has so far repaid £87m in overdraft charges this year. The five main banks have handed back almost £400m in charges since January.
Barclays said it will be entitled to reclaim any further charges from the woman should the test case be successful. The judge suspended Nadine Fry's claim until the outcome of the test case.
John Fry, who pursued the case on his daughter's behalf, explained how he persuaded the judge also to suspend any further penalty charges. 'I argued that a stay would have serious financial implications for my daughter as she would have to continue meeting interest payments on her debts, whereas the sum in question (£1,384) would have been sufficient to clear her debt entirely,' he said.
The OFT and the banks are currently involved in bringing a test case to clarify whether bank charges are unlawful. Consumer lawyers claim that the fees the bank collects when a customer goes overdrawn, or a direct debit is bounced, contravene consumer contract legislation.
However, when the case will be heard is not known and it may be many months before the courts issue a binding ruling.
This is Money - Hard-up can still make bank charges claims
A month after banks announced a landmark legal action against the Office of Fair Trading to establish the fairness or otherwise of unauthorised overdraft fees, confusion has erupted over the treatment of a particular group of customers.
Hundreds of thousands of them were in the process of reclaiming charges when the court case was announced on July 26.
Under a waiver granted by the Financial Services Authority, banks are allowed to defer dealing with these complaints until a court result is reached.
But the waiver specifically excludes 'hardship' cases, whose complaints, says the FSA, should be heard.
But 'hardship' is undefined and consumers might not be aware that they can push forward a claim.
Consumer group Which? is pressing for clarification from the FSA.
'Hardship is a woolly concept and no one seems to know what it means,' a spokesman says.
The FSA suggests that banks use the definitions laid down by the voluntary Banking Code Standards Board.
Meanwhile claimants in difficulty should persist.
This is Money - Banks repay £800m in fees
Banks have been forced to give back nearly £800m of unfair charges after pressure from the most successful consumer revolt ever.
The campaign against the high street banks has seen more than onem customers make claims for unauthorised overdraft and bounced cheque fees going back six years.
HSBC revealed today that it refunded £116m in the six months to June. Rival lenders have so far stopped short of detailing the amount they have given back.
But analysts said HSBC's bill means the total for the banks as a whole will be between £750m and £800m.
Customers claimed the charges are unfair and breach the 1999 Consumer Credit Act which says banks cannot make a profit from fees but only cover their costs. So far thousands of claims have been settled in full without reaching court.
There is now a moratorium on payments pending the result of a court action brought by the Office of Fair Trading last week to clarify the legal position. But if the OFT rules in favour of the consumer there will be millions more claims.
Mike Naylor, personal finance manager at account switching website uSwitch, said: 'We have seen evidence that the banks are trying to get this revenue back through higher overdraft interest rates and extra fees such as higher fees on taking out money abroad.' In its statement to the City, HSBC said it 'considered the charges to be and to have been valid and enforceable, and intends to defend its position'.
Bank charges case dismissed
In a separate development, a bank customer seeking damages over 'unfair' penalty charges had his application dismissed today. Tom Brennan was told he could not continue with his legal bid to obtain damages from NatWest bank.
However, Brennan was seeking examplar damages over and above a penalty charge refund, which had already been made by NatWest. So the outcome of the case will have little or no bearing on the High Court test case or on other reclaim cases currently in the County Courts.
Brennan had initially entered a claim for around £2,800 in bank charges, which he claimed were 'unfair', and Natwest had unilaterally put around £2,600 to £2,700 into his account. NatWest had also agreed to pay other costs, so Brennan had received £3,000 in total.
But alongside full reimbursement of the charges, Brennan sued for damages to be paid in recognition of the stress he incurred and the inconvenience that the loss of money had caused him. In addition, he was asking for exemplary damages - which are awarded against a defendant when a wrong is deemed to be deliberate, malicious or negligent - to be made against NatWest.
NatWest had already offered Mr Brennan £3,800 to settle out of court, which Mr Brennan is the reason the judge threw out the case. 'It's not a binding decision. The only reason it was dismissed was because the bank had repaid my money,' he told the BBC.
His application to appeal the decision was also denied by City of London County Court, but he was told NatWest would not be seeking costs from him in the case.
This is Money - Bank charges latest: Carry on claiming
Carry on claiming. That is the message for bank customers seeking refunds of unfair penalty charges, despite the long-awaited test case being brought in the High Court yesterday.
Thousands of people who are in the process of claiming refunds will have to wait until the outcome of the case, which has been sought by the Office of Fair Trading (OFT) and the main High Street banks to resolve the issue one way or the other. But campaigners said the public should carry on making claims regardless.
Until the court has delivered its judgment – and it is unclear how long that may take - the Financial Services Authority has told the banks they can suspend the handling of complaints. As a result, all existing and subsequent claims will be recorded by banks, but any potential refunds will be put on hold until the outcome of the case is known.
Offers already made to customers will be honoured if customers choose to accept them rather than waiting to see what the court decides. Banks will also be writing to the courts requesting a stay of all claims that are pending until after the outcome of the test case. The FSA said it did not think it was in the interest of consumers for the complaints to continue to be handled in the current 'inconsistent way'.
Marc Gander, co-founder of the Consumer Action Group, said he was very excited at the prospect of a test case. 'I'm completely confident that the court will find in favour of consumers – we are going to win,' he declared before proceeds began in London today.
He urged bank customers to carry on with their claims so as not to miss out on potential refunds. 'There is a six-year limitation period. When this case is over, it may be that everyone will still have to bring legal action to get their refunds, so they will lose out if they wait.'
Gander added that it was very important to keep up the pressure on the OFT which had been 'bowled over' by consumer action on the issue.
His view was supported by Doug Taylor, personal finance campaigner with consumer group Which?. He said: 'A lot of time and money could have been saved if the banks had not tried to evade questions about their charging structures for the past year. It's unfortunate that it has to go to court, but at least we will get a decision that banks cannot dispute. We hope that this will be a speedy process so consumers are not left in limbo, but in the meantime people should not stop claiming.'
This is Money - Complaints lead to account closure threat
Thousands of people who have complained about unfair bank charges have been threatened - in breaching of industry guidelines - with having their accounts shut down.
A study conducted by This Is Money reveals the extent of bullying tactics being used by some of Britain's largest banks against some of its most vulnerable customers.
More than one in eight people who has tried to reclaim excessive bank fees has been threatened with having their account - and overdraft facilities - closed. Such customers are often in debt and some have incurred huge fees running into hundreds of pounds after going only slightly overdrawn.
The threats by banks run counter to principles laid down in the Banking Code and reinforced by the Financial Ombudsman, which state that banks must treat customers fairly when they are in financial difficulty.
Robert Skinner, chief executive of the Banking Code Standards Board, says: 'Banks are allowed to close down accounts for commercial reasons. But they must also treat fairly any customers who are experiencing financial difficulties.'
He says the situation is improving following Ombudsman rulings in favour of customers and banks are now threatening fewer account closures.
The study by This Is Money also found that about half of those surveyed claim to be owed more than £1,000 in default charges. And about a quarter of those who lodged complaints won back the full amount.
But many banks still appear to be stalling on making payments to customers who win their claim. Only 17 pc of claimants received their money within a month of winning back their charges, and another 17 pc had to wait more than a year.
Last week, research by investment bank Credit Suisse found that fee reclaiming has already cost banks £200m this year. It said that the banks had been hit hard by the backlash against excessive charges, predicting it would cost around 1% of the major groups' profits this year.
