Bank Charges Test Case Begins

by Stewart Douglas

Story link: Bank Charges Test Case Begins

The retail banking industry could be set to change forever today as the first High Court test case over the legality of bank charges levied on customers drifting into their overdraft without permission begins, which will give an indication at least initially of how the courts will read the situation.

After a prolonged period of debate and legal wrangling, the High Court will today begin hearing the arguments from both sides as to how much banks should be allowed to charge their customers for overspending on their agreed overdraft limits.

Until today, common practice has been for banks to levy steep charges on retail customers, often as much as £30 of £40 for slight straying into the red.  However, as a result of a consumer backlash it now appears that the practice of charging to such an extent, which often drives those with precarious financial positions further into debt, could be set to be changed, depending on the High Court ruling.

The laws concerned relate to fairness of contract terms, with legislation requiring any charge to be a fair reflection of administrative costs, rather than a penalty or fine.  However it is contended by several consumer groups that the extent of fines issued go beyond what is fair and reasonable.

As such many consumers were urged to reclaim their bank charges, back dated by up to several years in an attempt to recoup the excess, with some success.  However after many banks were criticised of ‘bullying’ customers in reclaim attempts, threatening counter legal action, the test case today by the OFT, brought against the major retail banks and building socieities, looks set to bring some clarity to the legal position of bank charges.