Bank charge complaints kept on hold until High Court ruling

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Current account providers have won the right to continue ignoring claims for compensation related to unauthorised overdraft charges until the outcome of a High Court hearing scheduled for the new year.

The Financial Services Authority said yesterday that it believed a waiver granted to the banks in July was working well, even though hundreds of thousands of complaints have been put on hold.

The FSA granted banks the right to ignore the usual deadlines within which customer complaints must be considered when it emerged that the Office of Fair Trading planned to take current account providers to court. The OFT wants a definitive ruling on whether unauthorised overdraft charges, which can often be as high as £35, are illegal under consumer laws.

Prior to the waiver being granted, leading banks had paid out hundreds of millions of pounds to customers complaining about the charges, despite insisting that there had been no breach of the law.

Yesterday, the FSA said it was sensible to leave complaints on hold until the High Court, where the OFT's case will be heard in January, had made a ruling.

"The test case between the OFT and the firms is a crucial step in establishing certainty about the legality and fairness of unauthorised overdraft charges," said Clive Briault, the watchdog's managing director for retail markets. "When this certainty has been established, complaints about unauthorised overdraft charges can be dealt with consistently and fairly."

Consumer groups criticised the ruling, whichalso means that cases lodged with the Financial Ombudsman Service will remain on hold.

Martin Lewis, of Moneysavingexpert.com, said: "While we support the test case, the waiver is a disgrace – the banks were payingout huge amounts and wouldn't go to court, yet they've been rewarded."

Doug Taylor, a personal finance campaigner at Which?, said he was concerned that many banks had changed the way their accounts operated since the waiver was granted, an accusation the FSA promised to investigate. "We do not agree with the FSA that everything is working as it should," Mr Taylor said. "The FSA needs to be more proactive in ensuring there is no customer loss as a result of any changes."

The FSA's own Consumer Panel, which advises the watchdog on consumer issues, said it was worried by reports that credit-card companies were wrongly attempting to use the waiver to wriggle out of paying compensation, even though the OFT has already ruled that this sector of the banking industry should offer redress.

John Howard, chairman of the panel, said that customers in need of compensation would continue to suffer. "Although we understand why the FSA has put the waiver in place, it has had the unfortunate effect of delaying consumers' access to justice," Mr Howard said. "The longer this goes on the more unfair it will be, especially on those in financial hardship."

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