Banks may have to pay billions back in overdraft charges
As the Office of Fair Trading waits to hear from the Supreme Court with regards to whether it can set fair overdraft charge levels for banks a report has been released that indicates banks could end up paying billions of pounds back to consumers in returned overdraft charges, which would come as a huge blow given their current financial status. In fact, banks could be forced to pay back up to £20 billion in returned overdraft charges if the Office of Fair Trading wins the case.
The legal battle, which started in the High Court in January of 2008, has now escalated to the Supreme Court, which has taken over from the House of Lords as the highest court.
The Office of Fair Trading is now awaiting a decision with regards to whether overdraft charges from banks will be classed as unfair and unjust, and whether it will be able to scrutinise these charges and set them at what it fees are fair levels.
An official from Consumer Action Group said: ‘We have always suspected that the amount banks have taken from their customers has run into the tens of billions. This figure would just be the charges. Bank customers would have incurred interest on top of this. If the OFT wins, then, in a perfect world, the banks would contact all their customers and tell them what they have been overcharged. I can’t see them agreeing to anything like that. Our understanding of the law is if the entire payment is invalid, there is no basis for making a part-payment to customers.’
An official from the British Bankers Association said: ‘Obviously we can’t pre-judge the case but we do know from earlier that there is widespread recognition there are costs involved to the banks in providing these services.’
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