OFT in talks with banks over reducing charges

Talks between high street banks and the Office of Fair Trading (OFT) on lowering the £2.6bn unauthorised borrowing charges on current accounts could lead to a breakthrough in months, it was revealed today.

The OFT announced the talks as it confirmed it would abandon its two-and-a-half year legal battle against six banks and one building society over the fees following a defeat at the Supreme Court last month.

The OFT, which pointed out the Government had threatened to legislate unless the banks changed their fees, said it hoped to report back on its progress in March.

Separately it said that it might still be possible for individuals to launch legal actions for refunds of fees of up to £35 charged for borrowing money without permission.

Having studied the Supreme Court ruling on November 25, the OFT said it believed any future action under the 1974 Consumer Credit Act – rather than the 1999 Unfair Terms in Consumer Contracts Regulations, which it had previously used – was likely to fail.

However it expressed ongoing “significant concerns” about the personal current account market, and planned to discuss a range of options from voluntary measures to legislative change with banks and consumer groups.

Current account customers who go into unauthorised overdraft or breach their agreed limit can be charged as much as £35 for a single bounced payment, although campaigners claim the actual cost to the banks could be as low as £2.50.

Banks earn around a third of their £8bn revenues for personal current account from the charges, which the OFT complained were “difficult to understand, not transparent and not subject to effective consumer control”.

“We remain deeply concerned that the market for personal current accounts is not working well for consumers and does not give banks sufficient incentives to compete,” said John Fingleton, the OFT’s chief executive.

“We are committed to securing significant changes to unarranged overdraft charges going forward, whether through voluntary agreement with the banks or by other means.”

The watchdog stressed that its decision “should not be treated as advice” to customers considering bringing an individual action against financial providers under the Consumer Credit Act, which would be decided on the particular facts in each case.

The British Bankers’ Association welcomed the OFT’s decision. “The banks understand customers' concerns, and talk to their customers regularly and develop accounts in line with feedback,” the BBA said, adding that it would enter talks with the OFT.

It defended the current account market as “competitive and dynamic.”

The end of the test case means one million claims for refunds currently with the banks will be rejected and scuppers the prospect of automatic payouts of billions of pounds for nine million customers who have paid the charges since 2001.

Philip Cullum, acting chief executive of Consumer Focus, said: “This decision will add to the public frustration towards the banking sector. Banks must realise that consumer confidence in the sector is incredibly weak and that real changes are needed.”

The Liberal Democrat leader Nick Clegg described the ruling as “extremely disappointing.” “Having come so close to overhauling an unfair system of charging that penalises vulnerable groups of people, I know that the campaign will not just stop. The Liberal Democrats will continue the fight for fair bank charges in Parliament and push for a change in the law if necessary so that high street banks cannot keep ripping off their customers.”

Which? chief executive Peter Vicary-Smith said: “Consumers have been left confused by this decision. It looks like the big refund war is over but there is a narrow possibility that some people might be able to claim back their bank charges. The situation needs clarification and we’re looking into it as a matter of urgency.

He advised people to sit tight and avoid claims handlers, who charge a fee for doing something consumers could do themselves.

During the bank charge revolt, which was championed by The Independent, customers received an estimated £1bn in goodwill payments. Many banks have also lowered their fees, though they have sought to introduce more charges for running current accounts, threatening the end of ‘free banking’ for those in credit.

Martin Lewis, of Moneysavingexpert, said it had been the most successful campaign since the Poll Tax riots in 1990. He said: “We have seen £1bn paid back and many banks – but not all, sadly – have lowered their charges. We have seen people realise that bank managers are not people in bowler hats there to help them but are there to make money from them, and put all three together and it’s been a very successful campaign.”

Independent Partners; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at VouchedFor.co.uk

News
Approved Food sell products past their sell-by dates at discounted prices
i100
Sport
Jonny Evans and Papiss Cisse come together
football
News
Life-changing: Simone de Beauvoir in 1947, two years before she wrote 'The Second Sex', credited as the starting point of second wave feminism
peopleHer seminal feminist polemic, The Second Sex, has been published in short-form to mark International Women's Day
News
i100
Arts and Entertainment
The beat is on: Alfred Doda, Gjevat Kelmendi and Orli Shuka in ‘Hyena’
filmReview: Hyena takes corruption and sleaziness to a truly epic level
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Recruitment Genius: Evening Administrator

    £8 per hour: Recruitment Genius: This Pension Specialist was established early...

    Guru Careers: Executive Assistant / PA

    £30 - 35k + Bonus & Benefits: Guru Careers: We are seeking an Executive Assist...

    Ashdown Group: Graduate Application Support Analyst

    £25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...

    Reach Volunteering: External Finance Trustee Needed!

    Voluntary post, reasonable expenses reimbursed: Reach Volunteering: Would you ...

    Day In a Page

    Homeless Veterans campaign: Donations hit record-breaking £1m target after £300,000 gift from Lloyds Bank

    Homeless Veterans campaign

    Donations hit record-breaking £1m target after huge gift from Lloyds Bank
    Flight MH370 a year on: Lost without a trace – but the search goes on

    Lost without a trace

    But, a year on, the search continues for Flight MH370
    Germany's spymasters left red-faced after thieves break into brand new secret service HQ and steal taps

    Germany's spy HQ springs a leak

    Thieves break into new €1.5bn complex... to steal taps
    International Women's Day 2015: Celebrating the whirlwind wit of Simone de Beauvoir

    Whirlwind wit of Simone de Beauvoir

    Simone de Beauvoir's seminal feminist polemic, 'The Second Sex', has been published in short-form for International Women's Day
    Mark Zuckerberg’s hiring policy might suit him – but it wouldn’t work for me

    Mark Zuckerberg’s hiring policy might suit him – but it wouldn’t work for me

    Why would I want to employ someone I’d be happy to have as my boss, asks Simon Kelner
    Confessions of a planespotter: With three Britons under arrest in the UAE, the perils have never been more apparent

    Confessions of a planespotter

    With three Britons under arrest in the UAE, the perils have never been more apparent. Sam Masters explains the appeal
    Russia's gulag museum 'makes no mention' of Stalin's atrocities

    Russia's gulag museum

    Ministry of Culture-run site 'makes no mention' of Stalin's atrocities
    The big fresh food con: Alarming truth behind the chocolate muffin that won't decay

    The big fresh food con

    Joanna Blythman reveals the alarming truth behind the chocolate muffin that won't decay
    Virginia Ironside was my landlady: What is it like to live with an agony aunt on call 24/7?

    Virginia Ironside was my landlady

    Tim Willis reveals what it's like to live with an agony aunt on call 24/7
    Paris Fashion Week 2015: The wit and wisdom of Manish Arora's exercise in high camp

    Paris Fashion Week 2015

    The wit and wisdom of Manish Arora's exercise in high camp
    8 best workout DVDs

    8 best workout DVDs

    If your 'New Year new you' regime hasn’t lasted beyond February, why not try working out from home?
    Miguel Layun interview: From the Azteca to Vicarage Road with a million followers

    From the Azteca to Vicarage Road with a million followers

    Miguel Layun is a star in Mexico where he was criticised for leaving to join Watford. But he says he sees the bigger picture
    Frank Warren column: Amir Khan ready to meet winner of Floyd Mayweather v Manny Pacquiao

    Khan ready to meet winner of Mayweather v Pacquiao

    The Bolton fighter is unlikely to take on Kell Brook with two superstar opponents on the horizon, says Frank Warren
    War with Isis: Iraq's government fights to win back Tikrit from militants - but then what?

    Baghdad fights to win back Tikrit from Isis – but then what?

    Patrick Cockburn reports from Kirkuk on a conflict which sectarianism has made intractable
    Living with Alzheimer's: What is it really like to be diagnosed with early-onset dementia?

    What is it like to live with Alzheimer's?

    Depicting early-onset Alzheimer's, the film 'Still Alice' had a profound effect on Joy Watson, who lives with the illness. She tells Kate Hilpern how she's coped with the diagnosis