Thursday, 24 September 2009

Prime Minister intervenes in bank charges dispute

Prime Minister Gordon Brown yesterday called on the UK's banks to resolve the unfair bank charges dispute and negotiate a solution "without further delay". Further details of this story are available in The Guardian.

The decision of the Supreme Court (formerly the House of Lords)on whether the Unfair Terms in Consumer Contract Regulations can apply to overdraft fees is expected within weeks. If the banks were to lose this case (and they have already lost on this preliminary issue before the High Court and the Court of Appeal) there would still need to be a lengthy evidential hearing on the merits of the case i.e. whether the charges were indeed fair or unfair.

Accordingly, GLC believes it is likely that if the banks were to lose before the Supreme Court they may prefer to negotiate a settlement with the OFT - as happened with credit card default charges back in 2006. There have been previous reports that the OFT would be prepared to consider a negotiated settlement. In 2006, the OFT set an intervention figure of over £12, and most credit card companies reduced their default charges to £12.

Could that happen with bank charges? We think so. The fact that RBS/Natwest and HBOS are already reducing their fees is a strong indication that a solution to unfair bank charges may soon be within sight. And if that happens the freeze on seeking a refund will be lifted and millions of citizens will be able to pursue a backdated claim.

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