County Court rules on Barclays’ penalty fees

by Gill Montia

Story link: County Court rules on Barclays’ penalty fees

Luton County Court has passed a ruling preventing Barclays bank from taking any more penalty charges and interest from a customer who is in the process of suing the bank over fees for unathorised overdrafts.

The court order will prevent Barclays applying the charges until a High Court test case is settled.

In July of this year, the Office of Fair Trading (OFT) brought a case in the High Court, in an attempt clarify the legal issues surrounding such bank charges.

The OFT believes that the charges are unfair and illegal under consumer protection regulations.

The controversy surrounding the penalty charges has resulted in banks repaying almost £400 million in charges since January of this year; Barclays itself has so far repaid £87 million.

The decision made by Judge Abraham in Luton County Court is likely to cause alarm amongst UK banks, because other judges may adopt a similar line.

However, a spokesman for the Judicial Communications Office (JCO), which represents judges, has pointed out that the ruling is not a general policy and that each case is assessed on its own merits.

The outcome of the case in the High Court will not be known until next year and in the meantime the Financial Services Authority (FSA) has granted a waiver from the current rules, allowing the banks stop processing the majority new claims against them, until the legal issues are clarified.

The banks have also asked the courts to suspend all existing legal actions against them.

However, decisions on cases that are already before the courts will be made by local judges.