The Independent - Customer complaints in limbo as banks launch case over fees

Thousands of people will be left in limbo from today as Britain's banks launch a landmark court case in a bid to prove their charges for unauthorised borrowing do not break the law.

The Financial Services Authority and Financial Ombudsman said they would grant the big banks a waiver on complaints handling until the end of the court case, which pits the banks against the Office of Fair Trading.

Hundreds of millions of pounds is at stake in a case that could see the end of free banking if the banks lose. The waiver means that thousands of people who have lodged complaints about charges will be left hanging on for many months as the case goes works its way through the courts.

Existing complaints will, in effect, be frozen, while new complaints will only be logged. Those who have already received compensation offers will be able to accept them, but if they are unhappy they too will have to wait until the case is over.

The banks have faced a flood of complaints from consumers, angry at the fees levied when they accidentally slip into the red without first getting authorisation.

The case has been joined by Abbey, Barclays, HSBC, HBOS, which owns Halifax and Bank of Scotland, Lloyds TSB and Royal Bank of Scotland, the owner of NatWest. Nationwide Building Society has also signed up as have the Clydesdale and Yorkshire Banks.

Clive Briault, FSA managing director for retail markets, defended the decision to grant the waivers. He said:

"The FSA supports the test case on unauthorised overdraft charges as the current situation does not provide certainty or consistency for consumers or firms. We have granted the waiver to help facilitate this test case. We believe it is not in the interests of all consumers for complaints to continue to be dealt with in the current inconsistent way."

The British Bankers Association said banks believed the fees customers pay for unarranged overdrafts were "fair and clear".

Chief executive Angela Knight said:

"Establishing legal clarity on the issue of bank charges is of paramount importance, not only for the banking industry, but for all customers now and in the future."

The BBA admitted there was no way of saying how long complainants will have to wait for answers because "that will depend on the court process". Cases will be brought in Scotland and Northern Ireland as well as England and Wales.

The banks' decision to fight a test case follows the launch in May of a full-scale OFT investigation into whether banks are making unfair charges on current accounts. The watchdog has already ruled that penalty charges in the credit card market have been illegally high. But in March the OFT said it was concerned a similar ruling on overdraft fees - which can be as high as £35 a day - might have unintended consequences for the wider current account market. It subsequently deferred a ruling specifically on such charges while it ran the wider investigation.

The OFT inquiry, which is due to be completed by Christmas, is examining if the "provision of so-called free banking" is explained clearly to customers - particularly whether account holders understand when charges do become payable.

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