Today a number of banks and financial services organisations have taken the initiative, working jointly with the Office of Fair Trading (OFT) and the Financial Services Authority (FSA), to ask the UK courts to clarify the legal position regarding bank overdraft fees.
Banks believe the fees customers pay for unarranged overdrafts are fair and clear. However, this is clearly an issue where customers, as well as the banks, would welcome legal clarity. This is why banks have joined with the OFT to approach the courts for a ruling on this issue. It is unclear how long the case will last as that will depend on the court process.
The banks have approached the Financial Services Authority (FSA) and the Financial Ombudsman Service (FOS) to agree a way forward to handle existing customer complaints. The FSA has agreed to issue a waiver, with immediate effect, to suspend the handling of customer complaints on this issue pending a decision by the court. Other banks who are not party to the court action will be applying to the FSA for a waiver and as such will be bound by the outcome of the court case.
What this means for the customer
The FSA has agreed that all existing or subsequent customer claims for refunds of bank charges will be recorded by the customer's bank or building society but any decision about potential refunds will be put on hold until the outcome of the court case. Offers which have already been made to customers will be honoured if the customer chooses to accept.
Banks will be writing to the UK courts requesting a stay of all claims pending the outcome of this test case. The banks will be writing to customers with outstanding complaints advising them personally of their position.
Angela Knight, chief executive of the British Bankers' Association (BBA), 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 banks have always been firmly of the view that the fees they charge customers are fair and clear. The court case will clarify these points and provide certainty for customers and banks alike."