Friday, 31 July 2009

Bank abolishes unfair bank charges

The National Australian Bank (NAB) - owner of the UK's Clydesdale and Yorkshire banks - has announced it will abolish unauthorised overdraft charges for customers in Australia and New Zealand. Last year NAB cut its penalty charges from $50(£25) to $30(£15) and from 1 October 2009 these charges will be scrapped altogether.

The move will not be replicated by the Clydesdale Bank plc, who like other high street banks in the UK have continued to impose excessive and unfair charges on their customers while pursuing a legal strategy of opposition and delay in the OFT's test case litigation.

Two years have now passed since the OFT raised its test case in London's High Court and the group of UK banks have since appealed to the Court of Appeal and the House of Lords after the High Court ruled that the Unfair Terms in Consumer Contract Regulations could apply to overdraft charges. In this period very few UK citizens have had a refund of unfair charges, while UK banks have made around £5 to £6bn from fresh bank charges.

Some banks - like Lloyds TSB - have even introduced more regressive daily rate charging policies despite having agreed with the FSA not to do so pending the OFT test case. The UK taxpayer owns 43% of Lloyds TSB plc.

GLC and other campaigners have called on the UK Government to intervene in the public interest - without prejudice to ongoing litigation - by requiring the UK banks to reduce their future charges to proportionate levels; a measure which would ease the pressure on many hardpressed households up and down the UK during the current difficult economic climate.

So far the UK Government has shown no appetite to act, while the Conservative Party branded bank charges 'unfair' in their white paper on financial regulation, published last week.

Govan Law Centre has been working closely with Glasgow MP, Mohammad Sarwar, on a 10 minute rule bill which proposes a proportionate maximum limit on overdraft and other administrative charges in consumer contracts. The Prevention of Execessive Charges Bill received its first reading on 29 April 2009 with full cross-party support, with a second reading scheduled for 16 October 2009.

The House of Lords judgment in OFT v. Abbey National plc & others is expected shortly. If the UK banks are again unsuccessful there is every prospect that they will appeal this decision to the European Court of Justice, and if so, further delay, and excessive charges will ensue for vulnerable British citizens. The case for UK Government intervention is overwhelming.

A full article on NAB's change of charging policy is available on

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