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.”

Sport
Alexis Sanchez has completed a £35m move to Arsenal, the club have confirmed
sportGunners complete £35m signing of Barcelona forward
Life and Style
A binge is classed as four or more alcoholic drinks for women and five or more for men, consumed over a roughly two-hour period
tech
News
Detail of the dress made entirely of loom bands
news
Life and Style
More than half of young adults have engaged in 'unwanted but consensual sexting with a committed partner,' according to research
techResearchers recover 100s of nude photos from second-hand smartphones
PROMOTED VIDEO
Life and Style
It beggars belief: the homeless and hungry are weary, tortured, ghosts of people – with bodies contorted by imperceptible pain
lifeRough sleepers exist in every city. Hear the stories of those whose luck has run out
Life and Style
fashionJ Crew introduces triple zero size to meet the Asia market demand
Sport
Santi Cazorla, Mikel Arteta and Mathieu Flamini of Arsenal launch the new Puma Arsenal kits at the Puma Store on Carnaby Street
sportMassive deal worth £150m over the next five years
Arts and Entertainment
Welsh opera singer Katherine Jenkins
musicHolyrood MPs 'staggered' at lack of Scottish artists performing
Life and Style
beautyBelgian fan lands L'Oreal campaign after being spotted at World Cup
Finacial products from our partners
Property search
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

    Account Management Strategy Manager

    £38000 - £42000 per annum + competitive: Real Staffing: Required skills:Previo...

    Business Analyst Consultant (Financial Services)

    £60000 - £75000 per annum: Harrington Starr: Business Analyst Consultant (Fina...

    Systems Administrator - Linux / Unix / Windows / TCP/IP / SAN

    £60000 per annum: Harrington Starr: A leading provider in investment managemen...

    AVS, JVS Openlink Endur Developer

    £600 - £700 per day: Harrington Starr: AVS, JVS Openlink Endur Developer JVS, ...

    Day In a Page

    A History of the First World War in 100 Moments: Peace without magnanimity - the summit in a railway siding that ended the fighting

    A History of the First World War in 100 Moments

    Peace without magnanimity - the summit in a railway siding that ended the fighting
    Scottish independence: How the Commonwealth Games could swing the vote

    Scottish independence: How the Commonwealth Games could swing the vote

    In the final part of our series, Chris Green arrives in Glasgow - a host city struggling to keep the politics out of its celebration of sport
    Out in the cold: A writer spends a night on the streets and hears the stories of the homeless

    A writer spends a night on the streets

    Rough sleepers - the homeless, the destitute and the drunk - exist in every city. Will Nicoll meets those whose luck has run out
    Striking new stations, high-speed links and (whisper it) better services - the UK's railways are entering a new golden age

    UK's railways are entering a new golden age

    New stations are opening across the country and our railways appear to be entering an era not seen in Britain since the early 1950s
    Conchita Wurst becomes a 'bride' on the Paris catwalk - and proves there is life after Eurovision

    Conchita becomes a 'bride' on Paris catwalk

    Alexander Fury salutes the Eurovision Song Contest winner's latest triumph
    Pétanque World Championship in Marseilles hit by

    Pétanque 'world cup' hit by death threats

    This year's most acrimonious sporting event took place in France, not Brazil. How did pétanque get so passionate?
    Whelks are healthy, versatile and sustainable - so why did we stop eating them in the UK?

    Why did we stop eating whelks?

    Whelks were the Victorian equivalent of the donor kebab and our stocks are abundant. So why do we now export them all to the Far East?
    10 best women's sunglasses

    In the shade: 10 best women's sunglasses

    From luxury bespoke eyewear to fun festival sunnies, we round up the shades to be seen in this summer
    Germany vs Argentina World Cup 2014: Lionel Messi? Javier Mascherano is key for Argentina...

    World Cup final: Messi? Mascherano is key for Argentina...

    No 10 is always centre of attention but Barça team-mate is just as crucial to finalists’ hopes
    Siobhan-Marie O’Connor: Swimmer knows she needs Glasgow joy on road to Rio

    Siobhan-Marie O’Connor: Swimmer needs Glasgow joy on road to Rio

    18-year-old says this month’s Commonwealth Games are a key staging post in her career before time slips away
    The true Gaza back-story that the Israelis aren’t telling this week

    The true Gaza back-story that the Israelis aren’t telling this week

    A future Palestine state will have no borders and be an enclave within Israel, surrounded on all sides by Israeli-held territory, says Robert Fisk
    A History of the First World War in 100 Moments: The German people demand an end to the fighting

    A History of the First World War in 100 Moments

    The German people demand an end to the fighting
    New play by Oscar Wilde's grandson reveals what the Irish wit said at his trials

    New play reveals what Oscar Wilde said at trials

    For a century, what Wilde actually said at his trials was a mystery. But the recent discovery of shorthand notes changed that. Now his grandson Merlin Holland has turned them into a play
    Can scientists save the world's sea life from

    Can scientists save our sea life?

    By the end of the century, the only living things left in our oceans could be plankton and jellyfish. Alex Renton meets the scientists who are trying to turn the tide
    Richard III, Trafalgar Studios, review: Martin Freeman gives highly intelligent performance

    Richard III review

    Martin Freeman’s psychotic monarch is big on mockery but wanting in malice