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Banks have been given another six months grace to put off dealing with customers who want their overdraft charges refunded.

The Financial Services Authority (FSA) has extended a decision which it first put in place a year ago.

The FSA said it had done this to help the courts decide the fairness of bank overdraft fees.

Bank charge campaigners said they were not surprised, but argued the situation was grossly unfair to customers.

'Unhappy'

It is thought that tens of thousands of bank customers have had their complaints put on hold pending a resolution on the legality of overdraft charges.

Marc Gander, of the Consumer Action Group (CAG), said banks should be stopped from continuing to levy overdraft fees on customers who had lodged complaints.

"It's about time that there was some reciprocal obligation on the banks to stop their enforcement procedures," he said.

"They should be stopped from defaulting people on disputed sums and instructing debt collection agencies on a matter which the banks are likely to lose," he added.

However, the consumers' association Which?, which has also been campaigning on the issue, described the waver as a necessary evil.

"Scrapping it won't get people their money back - only the banks can do that by conceding defeat and paying up instead of continuing to string out the process," said Louise Hanson of Which?

Hardship

The FSA explained that it was extending the suspension of its normal rules, which require banks to deal with complaints promptly, because the High Court has still not decided if bank overdraft charges are unfair or not.

Banks "will not be required to handle complaints relating to unauthorised overdraft charges within the time limits set out in the dispute resolution manual," the FSA said.

The regulator also pointed out that it had made its guidance to banks on dealing with hardship cases more explicit.

Defining hardship as an income "insufficient to cover reasonable living expenses and meet financial commitments as they become due," it said that banks might deal with customers in this situation by waiving charges in the future, or not enforcing past ones if the debt itself consisted of previous overdraft fees.

Despite this, another bank campaigner, Martin Lewis, said the waiver extension was a "kick in the teeth".

"It's nearly a year since the FSA first kiboshed reclaiming, and people are still sitting on their hands, unable to try to reclaim money," he said.

"How long are people expected to wait? Another six months? Until it goes to the Court of Appeal? The House of Lords? The European Court?" he asked.

More hearings

The FSA says it will review the waiver again before it expires at the end of next January.

Meanwhile the general stay on new cases being dealt with in the county courts and with the Financial Services Ombudsman (FSO) is also still in operation.

A second round of High Court hearings involving the banks and the Office of Fair Trading (OFT), which may finally decide if bank charges are fair or not, is expected to start before the end of the year before Mr Justice Andrew Smith.

Earlier this year he ruled that the OFT had jurisdiction in the matter, and he has recently been asked to rule if fees levied under previous bank terms and conditions can also similarly be assessed by the OFT.

But any appeals on the issue of the OFT's jurisdiction, or the fairness of the fees themselves, could drag out the issue far into next year

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