Leading article: The battle is lost, but not the war

Share
Related Topics

The legal battle against extortionate bank charges is now officially over. Last month the Supreme Court ruled that the Office of Fair Trading (OFT) could not use consumer contract regulations to impose its views on the fairness of bank overdraft charges. And yesterday the OFT confirmed it would mount no further challenges to such fees through the courts.

But though an important battle has been lost, the war is far from over. And the Government, for a change, is leading the charge. The Consumer Affairs minister, Kevin Brennan, warned this week that unless banks voluntarily get rid of these punitive charges, the Government will draft legislation requiring them to do so.

The law in this area, as we have seen, is complex, but the principle is very clear. As the OFT argues, it is unfair for the banks to charge customers more than it costs them to process an unauthorised withdrawal. It is not the existence of fees that is the problem, but their extortionate nature (up to £35 for each transgression).

The argument that this is a reasonable, even helpful, penalty for imprudence is nonsense. Those who are overdrawn already pay interest on their borrowings. Why should they be punished twice? Moreover, the banks do not levy these charges with the best interests of their overdrawn customers in mind, but because they generate £2.6bn in revenues a year. The motivation for these charges is not prudence, but profit.

The idea that customers, if they don't like the terms and conditions of their account, can simply change their bank is also weak. In the present concentrated high street banking market, customers would find themselves fleeing from the frying pan into the fire. The solution, in the longer term, is more genuine competition in retail banking, where a healthy number of lenders would have a real incentive to attract customers by treating them fairly.

But for now a government nudge is required to make this market work better. Some banks have voluntarily lowered their fees of late. The rest of the sector now needs to follow. If they resist, the Government should not hesitate to pass legislation. Penalty overdraft fees might be legal, but that does not make them justified.

React Now

Latest stories from i100
iJobs Job Widget
iJobs General

Sustainability Manager

Competitive: The Green Recruitment Company: Job Title: Scheme Manager (BREEAM)...

Graduate Sustainability Professional

Flexible, depending on experience: The Green Recruitment Company: Job Title: T...

Business Project Manager

£350 - £400 Per Day: Clearwater People Solutions Ltd: Project Manager job vaca...

Business Analyst (Agile, SDLC, software)

£45000 - £50000 Per Annum + excellent benefits: Clearwater People Solutions Lt...

Day In a Page

Read Next
80 per cent of Commonwealth countries discriminate against LGBTI people - will Salmond speak out?  

Alex Salmond must speak out against the Commonwealth's homophobic countries

Peter Tatchell
 

Commonwealth Games 2014: Speak out against homophobia, Mr Salmond

Peter Tatchell
Some are reformed drug addicts. Some are single mums. All are on benefits. But now these so-called 'scroungers’ are fighting back

The 'scroungers’ fight back

The welfare claimants battling to alter stereotypes
Amazing video shows Nasa 'flame extinguishment experiment' in action

Fireballs in space

Amazing video shows Nasa's 'flame extinguishment experiment' in action
A Bible for billionaires

A Bible for billionaires

Find out why America's richest men are reading John Brookes
Paranoid parenting is on the rise - and our children are suffering because of it

Paranoid parenting is on the rise

And our children are suffering because of it
For sale: Island where the Magna Carta was sealed

Magna Carta Island goes on sale

Yours for a cool £4m
Phone hacking scandal special report: The slide into crime at the 'News of the World'

The hacker's tale: the slide into crime at the 'News of the World'

Glenn Mulcaire was jailed for six months for intercepting phone messages. James Hanning tells his story in a new book. This is an extract
We flinch, but there are degrees of paedophilia

We flinch, but there are degrees of paedophilia

Child abusers are not all the same, yet the idea of treating them differently in relation to the severity of their crimes has somehow become controversial
The truth about conspiracy theories is that some require considering

The truth about conspiracy theories is that some require considering

For instance, did Isis kill the Israeli teenagers to trigger a war, asks Patrick Cockburn
Alistair Carmichael: 'The UK as a whole is greater than the sum of its parts'

Alistair Carmichael: 'The UK as a whole is greater than the sum of its parts'

Meet the man who doesn't want to go down in history as the country's last Scottish Secretary
Legoland Windsor's master model-makers reveal the tricks of their trade (including how to stop the kids wrecking your Eiffel Tower)

Meet the people who play with Lego for a living

They are the master builders: Lego's crack team of model-makers, who have just glued down the last of 650,000 bricks as they recreate Paris in Windsor. Susie Mesure goes behind the scenes
The 20 best days out for the summer holidays: From Spitfires to summer ferry sailings

20 best days out for the summer holidays

From summer ferry sailings in Tyne and Wear and adventure days at Bear Grylls Survival Academy to Spitfires at the Imperial War Museum Duxford and bog-snorkelling at the World Alternative Games...
Open-air theatres: If all the world is a stage, then everyone gets in on the act

All the wood’s a stage

Open-air productions are the cue for better box-office receipts, new audiences, more interesting artistic challenges – and a picnic
Rand Paul is a Republican with an eye on the world

Rupert Cornwell: A Republican with an eye on the world

Rand Paul is laying out his presidential stall by taking on his party's disastrous record on foreign policy
Self-preservation society: Pickles are moving from the side of your plate to become the star dish

Self-preservation society

Pickles are moving from the side of your plate to become the star dish
Generation gap opens a career sinkhole

Britons live ever longer, but still society persists in glorifying youth

We are living longer but considered 'past it' younger, the reshuffle suggests. There may be trouble ahead, says DJ Taylor