Banks find out that their charges are most likely unfair

Over the past couple of years the bank charges applied to accounts by banks have been at the centre of controversy, with some banks charging close to £40 per fee when the customer went over their overdraft limits and for returned direct debits and bounced cheques. Officials from the Office of Fair Trading were concerned because the charges were far too high, because they did not in any way reflect the costs incurred by the bank, which amounted to just a few pounds.

As a result of the battle between banks and authorities the matter relating to bank charges found itself at the centre of a High Court test case earlier this year. After several weeks the first round of the battle went to the Office of Fair Trading, and although no final decision on bank charges has yet been made the OFT has been given the right to assess banks’ terms and conditions including bank charges, for fairness.

According to one recent report some of the main banks in the UK have now been told that their bank charges are probably not fair, and in a memo that was provided to senior staff at RBS the OFT expressed serious concerns that the overdraft terms of the bank may be unfair for consumers. This comes after the OFT was given the go ahead by the High Court to look at and assess these charges.

Reports also show that the OFT contacted all of the banks whose overdraft charges had been assessed in the middle of August to let them know what the situation was.

In a public statement the OFT said at that time: “At this stage, no bank’s terms have been given a clean bill of health and all banks remain under investigation.”

With regards to the letter the OFT stated: “The purpose of the letters is to start a dialogue with each bank to enable us to reach final conclusions as to whether the terms are unfair, and to identify which issues may need to be resolved in court proceedings.”

The report also claims that the memo sent to RBS staff states: ”The OFT has written to the test case banks with its preliminary views on the fairness of administration charges terms. It has told RBS that it has “serious concerns” that the terms may be unfair.”

The memo also states that “RBS is considering its response. This is a key step towards phase 2 of the test case, which is not due to start until early 2009”.

One campaigner said that the OFT needed to make it publicly clear at this stage that it thought the charges were unfair, stating: “The OFT would not have spent all this time investigating the issue if it did not believe the charges were unfair. But I believe the OFT should now make public the fact it thinks the charges are indeed unfair.”

Another industry official said: “If this opinion of the OFT is confirmed with regard to the current charging structure, it is difficult to see how the banks will be able to have a system resembling their current overdraft charges at all.”