With the recent ruling on excessive bank charges on overdraft fees by the Supreme Court in favour of the banks there has been increased speculation that the law has been wilfully misinterpreted so that further financial issues for the banks can be avoided. It has been widely acknowledged that should the Office of Fair Trading (OFT) have won the case against the banks this would have resulted in a loss of £2.6 billion annual income to the banks. It seems to me that both the Supreme Court and the banks in the UK forget we, the taxpaying public, now part own the banks.
I suppose in the current economic crisis that is still gripping the UK, the ruling probably should not come as that much of a surprise to us. Unfortunately it is relatively easy to understand why they ruled in favour of the banks. However, this does not mean that they were right.
Consumers and small businesses alike have every right to be appalled by the outcome of this case, made worse by the pompous arrogance displayed in the British Bankers’ Association (I can think of a better name for them!) comments that the charges were an important part of current account services and the amounts were “not assessable for fairness”. They went on to say:
“We recognise this issue has been of real concern to a large number of our customers and we are pleased that this decision now brings clarity for all parties.”
However, considering the banks make a third of their retail revenues from unarranged overdraft fees that are not only difficult to understand, are not transparent in any way and are not subject to consumer control how much clarity this case has actually brought is debatable really! All it’s really done is highlighted that these were all issues to begin with.
It is also worth considering that the cost to the bank of unauthorised overdraft fees is as little as £2.50 and yet they feel the need to charge a flat rate of anything up to £35.00 a time! In reaction to the outcome of this case the Liberal Democrat Leader, Nick Clegg, stated:
“Regardless of the legal position, it simply isn’t right that someone on a low income should pay £25 or more to their bank just because they’re overdrawn by a pound or two.”
Unfortunately, as well as consumers, it is also apparent that many Small businesses are likely to continue to be affected by the unfair, excessive charges made by the banks when an account goes over the agreed overdraft limit.
The question has to remain – if the UK’s small businesses are seen as the “backbone” of our economy and require more money pumped into them why are banks consistently throwing up restrictions such as unfair overdraft charges, limited access to funding as well as the exorbitant annual percentage rates (APR) on commercial loans?!
The good news is that there are other legal avenues for the OFT to go down should they wish to pursue a case against the banks. We will just have to wait and see if they choose to or not. In the meantime the Government have stated that they will continue to work with the banks to work out charges that are fair to everyone. As a warning shot, Sarah McCarthy Fry, the Exchequer Secretary to the Treasury, stated they would take further action against the banks if necessary.
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