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High Court Rules the OFT can Judge Bank Charges

High Court Rules the OFT can Judge Bank Charges The High Court has ruled that the Office of Fair Trading (OFT) has the right to decide whether bank charges for exceeding overdraft limits or unpaid direct debits are reasonable.

The court stressed that the ruling does not necessarily mean that the charges are unfair but consumer campaigners are seeing it as a victory, as the OFT now has the power to force banks to cut their charges, pending appeals by the institutions themselves.

The banks have until 22 May to appeal against the ruling and the thousands of cases currently going through the county courts have been frozen until this is resolved.


Hundreds of thousands of bank customers have reclaimed hundreds of millions of pounds to help with their debts since early 2006, when the issue came to light.

Customers - helped by money experts and consumer groups - have argued that the charges are excessive, although the banks insist that they are entirely reasonable. However, many banks have refunded charges anyway, anxious to avoid setting a legal precedent in court.

The average charge for a bounced cheque is around £32, while banks tend to charge around £31 for an unpaid standing order. Customers have argued that these sums greatly exceed the cost of processing the transaction and - under the law - banks are prohibited from using such charges to raise revenue.


However, despite the High Court ruling, customers in the middle of reclaiming charges should not expect to see a swift refund, as the OFT will not be making any final decision for several months.

In the meantime, customers trying to clear debt are advised to keep a firm grip on their finances and to do their best to ensure that transactions are visible and up-to-date, by avoiding writing cheques - which take days to hit an account - and not using the balance shown at ATMs as a final figure, as there are often several transactions pending.

Debt Management News posted on 02 May 2008

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