The Times

GORDON BROWN’S to-do list must be lengthening by the day as he prepares for his coronation as prime minister, but here’s one more for him: must deal with the bank charges mess.

It may not be up there with sorting out Iraq, but 3m people have downloaded a standard form to complain about what they see as unfair treatment by their bank, and thousands more claims are being sent in every week. That’s a lot of votes to sway with firm action and banging heads together.

A favourable verdict at Birmingham county court last week gave banks renewed hope that they could continue their curmudgeonly habits. The decision is not binding, but it will only encourage banks to continue their petty tactic of prolonging disputes. It is a truly Dickensian approach which has rightly been criticised by Judge David Mackie of the London mercantile court.

The Competition Commission has weighed in with a report recommending clearer statements, 14 days’ warning of charges and making it easier for customers to move to another bank.

The British Bankers’ Association rather sniffily pointed out that clearer statements are no use to those who don’t read them, implying that many don’t – but whose fault is that?

In any case, none of this will happen for at least another year, and maybe longer. The real problem is that the banks can’t agree among themselves what to do, and the laggards usually win.

Brown should not try to micro-manage the banks or create yet more bureaucracy. But fresh hints of a windfall tax, or moving some of the government’s extensive banking business elsewhere, might work wonders.

Until then, complainers should go to the Financial Ombudsman Service. It is free and sympathetic, and you can go on to court if you are still unhappy.

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Bank customers have been warned against being lured by 'ambulance chasers' when reclaiming bank fees

'Ambulance chasing' firms were criticised today for trying to muscle in customers who are reclaiming their bank charges.

The Information Commissioner’s Office confirmed that it has received a numberof complaints over unsolicited automated phone calls made by a claims handling firm.

Consumer groups said people were better off challenging banks directly rather than through a third party.

Claims management companies offer to take on a client’s case against a bank for them in return for a slice of the eventual refund. But many consumers can make a claim completely free of charge using a template letter .

The marketing tactics of claims handling companies is now under the spotlight following complaints concerning automated phone calls.

Such practices are in breach of the Privacy and Electronic Communications Tegulation, the Information Commissioner’s Office said.

It has written to one firm alleged to have contravened the rules.

Mark Gander of the Consumer Action Group, said:

“Cold calling is completely unacceptable. I understand that there is a lot of it going on."

Emma Bandey, personal finance campaigner at Which?, said: “Claiming back bankcharges really is easy and simple. We would urge people to do it themselves rather than using a claimw handling firm, as according to the Financial Ombudsman Service, it makes no difference to the outcome of a complaint whether it comes directly from the customer or from a claims management firm.

" In exchange for a little patience and time you can keep all the money refunded to you by your bank, rather than handing part of it over to someone else.”

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Lloyds TSB wins county court case against customer trying to reclaim almost £2,000 in unauthorised overdraft fees

The banking industry scored its first victory in the continuing battle over overdraft charges today when Lloyds TSB won a county court case against a customer trying to reclaim almost £2,000 in unauthorised overdraft fees.

A district judge at Birmingham County Court dismissed the claim from Kevin Berwick for £1,982.37 in fees and interest on the grounds that charges levied by the bank were a legitimate part of the service.

In a written verdict, Judge Cook said: “There is no evidence before me from which I could conclude that, taking into account the other elements of the service provided by the banks without charge, these particular charges were unreasonable.”

He added that having established that the fees were not charges for breach of contract but part of the price of the service provided by the bank, he was unable to rule that they were unfair.

The verdict is a blow to thousands of people still hoping to reclaim “unfair” charges from their bank. But campaigners noted that the ruling was made by a district judge and as such was not binding in the way that a High Court judgment would be.

Although the banking industry has always insisted that overdraft charges are legal, most banks have been paying settlements to claimants before the cases come to court. A spokesman for Lloyds TSB, which did not appear in court but offered a written defence, admitted that the claimant in this case was offered a partial settlement but it had been refused.

The spokesman said: “We are pleased with Judge Cook’s ruling as it appears to acknowledge our position in respect of current account service charges. The court has agreed with us that these are charges for a service and not default or penalty fees as has been argued by others.

“We will, of course, take time to review the full court ruling.”

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A High Court judge has told banks that he may award damages if they fail to behave reasonably when customers seek redress in the courts for bank charges. Judge David Mackie, QC, issued the warning at the London Mercantile Court, where about 300 claims for refunds of allegedly unlawful charges have been lodged this year. He said that some banks were wasting time by saying that they would defend claims when they seemed to have no intention of doing so. If banks continued to do this, he might award damages against them. “There may be a need for a more radical approach if the number of cases continues to grow, he said.

Brian Capon, of the British Bankers’ Association, said: “Banks take the court process very seriously but ultimately they would prefer to settle disputes with their customers outside the court process.”

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A court hearing tomorrow could mean millions of people will be able to claim a bigger refund

MILLIONS of people who have successfully reclaimed unfair bank charges could be due a bigger refund if a landmark court hearing tomorrow gives them the green light to sue their banks.

Tom Brennan, 30, a junior barrister from south London, is taking NatWest to court in relation to £2,500 that was taken from his account in unauthorised credit and bounced payment fees while he was a student.

Campaigners believe a successful legal claim could open the floodgates for billions of pounds more in refunds.

The banks are under growing pressure to come clean on charges after the Office of Fair Trading launched a full-scale inquiry into the fees they raise on personal accounts last week. The investigation will run alongside an existing investigation into the fairness of unauthorised overdraft charges announced earlier this year.

However, the OFT is not expected to come to any conclusions until the end of this year.

Tired of waiting for action, some savers are now pushing the banks to take them on in the courts. So far, no ruling on the legal status of the charges has been made. Every customer who has challenged their bank has settled out of court. But Brennan is determined that his case will be heard.

Alongside a full refund with interest, he is calling for aggravated and exemplary damages – a first in bank charges claims.

He also wants to contest the rule that you can only claim for charges going back six years. If his challenge is successful, even people who have already reclaimed penalty fees may be able to go back for more.

Brennan’s stance is already inspiring others to take legal action against their banks.

Stephen Hone, who set up Penaltycharges.co.uk, will file a case against Cooperative Bank tomorrow. He is not claiming back any money, but wants to find out if the charges the bank levies are illegal.

Andrew Hagger at Moneyfacts, an analyst, said: “If these cases are succesful banks will have to admit exactly how much it costs to process a bounced cheque or administer an exceeded overdraft.

“Perhaps more significantly, if it is shown that the charges banks levy are illegal, it could open the floodgates for millions of consumers to take their banks to court and win damages.”

Brennan believes he has the banks running scared, adding that his treatment by NatWest highlights just how keen banks are to keep cases out of court and avoid a successful prosecution.

Earlier this year he was sent a cheque for £4,000, or almost twice his claim amount, which he rejected. The bank also argued that it had already refunded his charges by putting £2,500 into his account in February.

However, Brennan said this money was “forced” into his account as he had not accepted it. His account was closed by NatWest earlier this month.

“I even had a sit-down meeting with the bank where they tried to dissuade me from going ahead, but they are not going to stop me,” he said.

A spokesman for NatWest said: “Mr Brennan has brought a claim against NatWest. That claim is the subject of ongoing defended court proceedings and it would be inappropriate to comment further.”

Tomorrow’s hearing will decide whether the case will proceed to a full trial. If it does, Brennan plans to challenge the six-year limit based on a clause in what is called the statute of limitations. In most small claims that don’t involve personal injury, you are allowed to make claims for losses that go back six years and no further. However, Brennan believes the statute could exempt savers from this limit.

He said: “I am of the opinion that you can claim for more than six years. There is a provision in the statute of limitations that allows you to do this if you can prove there has been deceit on one party’s side.”

Brennan will also question if banks have been making illegal profits from bank charges.

“The banks have made billions by investing the money they have made illegally, and the law is quite clear, you cannot profit from your wrongs,” he said.

Last week, Alliance & Leicester appeared to concede that penalty charges had been used to boost profits after it acknowledged that a fee of only £4.50 might be a fair charge for going overdrawn.

The bank put this charge forward in a letter sent to a customer to settle a claim for the refund of £2,035 in overdraft fees. The bank’s standard charge for bouncing a cheque is currently £25.

A spokesman for the bank said: “Alliance & Leicester treats each request for a refund of fees case by case and on its individual merits.

“We believe that our fees are fair and are clearly outlined to the customer and we have not accepted that £4.50 is a fair charge for unpaid items.”

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The Office of Fair Trading should pursue greater transparency in banking

Just as there is no such thing as a free lunch, there is no such thing as free banking. Bank customers pay, in one way or another, for every cheque they write, for every cash withdrawal, for every banker they talk to and every branch they visit. Charges are levied in partially visible or invisible ways, through vanishingly small interest rates on credit balances, for example, or by overcharging banking transgressors.

In comparison with the experience overseas, however, British banking looks freeish. Personal banking is free, or almost free, to those thrifty individuals blessed with the time and inclination to manage their finances sensibly. If you cross the sea to Ireland, cross the Atlantic to the US, or cross the world to Australia, you are likely to find yourself paying-as-you-go for even the most basic banking transactions. In the process you may also be clobbered by a tax.

The cost and quality of personal banking services in the UK could be a lot worse. Yes, it is underpinned by an awkward conspiracy of convenience where customers who obey the rules enjoy the spoils of a war waged by banks on those who do not. But reform, it might be argued, will create at least as many problems as it solves. It is, perhaps, a good thing that customers are penalised for mismanaging their money. Debt, used in sober moderation, can enhance living standards. But demon debt is a hard taskmaster, ably equipped to turn, bite and bring down the careless and incautious.

The availability of “free” banking, meanwhile, is a boon to those right-minded people concerned with the financial welfare of the underprivileged. Bank accounts are an enemy of the black economy and the black economy could be bolstered if barriers – financial or bureaucratic – disfigure bank accounts. You cannot do without a bank account to receive state benefits.

Yet the Office of Fair Trading should be lauded for putting personal bank accounts under its microscope. The OFT should also be helped to bring about change for the better. Banking in this country, in general, may be more friendly than it is overseas. But that does not justify complacent inactivity. If personal banking can be improved, it should be improved. Yes, “free” banking may enhance the worthy cause of financial in-clusiveness in some respects. But the imposition of difficult-to-understand charges for minor transgressions heaps an oversized burden on the less well-off. If you survive on £100 a week in benefits, disproportionate damage is done by a £35 letter sent after an accidental overdraft breach.

It is important, surely, to enshrine the principle that banks can levy charges for services but cannot impose outrageous fines for bad behaviour. The pursuit of profit is not evil, but fleecing customers will inevitably bring more political pressure to bear on the banking industry. If consumers are equipped with comprehensive and high-quality information they will be better able to make sound decisions. They will also act as superior regulators of their own actions and the actions of banks.

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Office of Fair Trading is to investigate overdraft charges as it widens its probe into personal current accounts.

The Office of Fair Trading is to broaden its planned investigation of the personal current accounts market to include penalty charges for unauthorised overdrafts.

The OFT also said it could force banks to charge customers for their current accounts. It fears free accounts encourage banks to make money from hidden fees such as overdraft penalties.

The watchdog said it would consider charges levied by banks against those who go into the red without prior permission. It fears the accounts act as a "gateway" to more profitable products, making it difficult for customers to determine the how much they pay for basic services.

Details of the study, announced in March, come as a newly qualified barrister proceeds with his case against NatWest over excessive charges. Tom Brennan is seeking damages from the bank after running up penalty charges of £38 for each lapse. He claims the charges were unlawful because, by his estimate, it costs the bank £2.50 to cover the cost of a customer breaching their overdraft limit.

John Fingleton, chief executive of the OFT, said: "Our ultimate objective is a competitive retail banking market in which informed and active consumers drive strong competition and high levels of customer service among banks long-term, with minimum regulatory intervention." He also said the investigation would focus on transparency of charges. He has previously raised the possibility that banks should be forced to make up-front charges for current accounts in return for the removal of hidden charges.

The OFT's investigation comes after the Competition Commission investigated the banking market in Northern Ireland. It concluded that banks there have "unduly complex charging structures and practices". The OFT believes the same issues are likely to be relevant in the UK.

Last April the OFT ruled penalty charges for overdrafts and credit cards were unlawful.

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A single mother who says she had to take time off work because of the stress of a disputed overdraft is suing the Halifax for harassment.

Alison Turner, 31, claims that the bank bombarded her with letters and phone calls after it had agreed to leave her alone.

The Halifax had already agreed to drop £775 of charges after Ms Turner exceeded her overdraft limit. But the bank continued to chase her for payment.

Ms Turner, from Plymouth, claims that she received 33 letters and calls from the collections department, many of them early in the morning and at night. She says that the resulting stress caused her to become ill, and that she had to take time off from her job as a personal assistant.

She has started a civil case under the Protection From Harassment Act 1997, seeking an injunction against the bank and “substantial damages”.

Neil Mercer, her solicitor, said: “She had hundreds of pounds worth of charges put on her account for going a few pounds overdrawn. The bank subsequently agreed to remove the charges but in the interim period she was constantly harangued for money she no longer owed. It caused sleepless nights and great concern. There is absolutely no question that the bank’s conduct amounted to harassment.”

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Credit card companies have made millions of pounds in extra profits since the OFT imposed a £12 cap on late-payment charges.

Credit card companies have made millions of pounds in extra profits since the Office of Fair Trading (OFT) imposed a £12 cap on late-payment charges, this time last year, by craftily hiking interest rates and balance transfer fees.

Firms are generating an extra £815m a year from the various ploys or nearly three times the £300m lost from capping late payment charges, according to research by uSwitch, the online comparison site.

Nick White at uSwitch said: “Credit card providers have squeezed every last penny out of consumers to recover the lost millions and have more than recovered it over the last year. Over the last 12 months consumers have been inundated with extra fees and charges.”

Since the £12 cap was imposed, the average interest rate for new purchases has been hiked from 15.19 per cent to 16 per cent. For cash withdrawals the rates have risen from 20.37 per cent to 23.01 per cent.

Balance- transfer fees have also gone up to punish savvy consumers who regularly switch their card balances to cheaper deals. Typical rates have risen from 2 per cent to 2.5-3 per cent of the amount transferred, and caps on maximum charges have been removed.

These are the most blatant changes but providers have also introduced a range of sneaky charges that customers may have missed.

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Banks face being hit with billions of pounds in compensation claims for “useless” debt insurance in a consumer revolt that could be bigger than that over bank charges.

Millions of people with overpriced loan insurance — supposed to cover repayments if you can’t work — have been given the green light to claim for mis-selling after two announcements from the Financial Services Authority (FSA) in the past month.

Insiders say the scale of the scandal could eventually dwarf bank charges and even endowment mis-selling. There are some 20m loan insurance policies worth £5.5 billion in Britain, and one industry insider, who wished to remain anonymous, thinks as many as 70 per cent could have been mis-sold. If so, the industry could face claims worth up to £3.85 billion from 14m people.

By contrast, about 2m people are thought to be reclaiming ‘illegal’ overdraft charges at a cost to the industry of up to £1.2 billion a year, according to Credit Suisse, an investment bank.

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