Don't bother taking your bank to court

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The Independent Online

The hysteria over bank charges has spiralled out of control over the past few weeks, as consumers have headed in their droves for the courts, desperate to avenge their "unfair" treatment. Although many may well have strong cases in the eyes of the law, it is incredible to see just how quickly people have managed to mobilise.

Only a few months ago, the very same people who are now suing their banks were blissfully unaware that their current account charges may have been illegal. Today, they're incredulous about how they've been ripped off.

Personally, I'm rather sceptical about people reclaiming thousands of pounds of charges from years gone by. Surely most people realised that they would get penalised if they busted their overdraft limit. But if the authorities find that these fees were illegal, then so be it.

However, I wonder if it's not possible to resolve most of these cases without going to the courts. The backlog in many mercantile and county courts has become unwieldy, and the various judgments that are being made show little consistency.

Some judges have been critical of the banks, ordering them to repay thousands of pounds in charges, and even – in a few isolated incidents – additional compensation. Others have found in favour of the company. Lloyds TSB, for example, recently found itself being rapped over the knuckles in London's Mercantile Court, only weeks after a Birmingham County Court judge had taken the company's side in a similar case.

There is really no need for the courts to get involved at all. The Financial Ombudsman Service, which was set up precisely to deal with these kind of disputes, delivers bank customers an equally speedy result. Best of all, it doesn't cost the complainants anything.

Furthermore, of all the cases that have been referred to the Ombudsman so far, not a single one has been rejected – principally because the banks are petrified of the Ombudsman making a formal decision. If the banks agree to settle with their customers relatively early in the dispute process, they ensure that no kind of precedent is set. Once the Ombudsman makes a formal ruling, however, the banks risk being swamped with thousands more claims.

The banks' behaviour has been far from exemplary in all this. In many cases, they have gently encouraged angry customers to follow the courts route, acutely aware that no precedents are set in the lower tiers of the British legal system. In other instances they have stalled, hoping that complainants will not have the patience to hold on for the sake of a four-figure sum.

The banks only have themselves to blame for the mess they're in, however. Given that the Office of Fair Trading is not planning to make an official ruling on the legality of charges until later this year, the banks should have held their ground. As soon as they started making isolated payments in response to complaints earlier this year, there was no turning back.

It's all turned into a nasty mess that serves only to further destroy consumers' trust in the financial services industry. The sooner it's cleared up, the better.

* A few weeks ago, I mentioned how frustrated I am that I can't pay my Nationwide credit card bill on their website, especially given their boasts about how they invented internet banking. To my surprise, the comment sparked dozens of emails in support of the building society.

Although the messages were correct to point out that you can pay off your card online, this is only the case if you're a Nationwide current account holder. Alas, I'm not – and so cannot. But it was nice to see so many letters of support for a financial services company, rather than the more regular gripes. Don't forget to keep them honest by voting online at the forthcoming Nationwide AGM.

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