OFT approaches court seeking ruling on unfair bank charges

OFT approaches court seeking ruling on unfair bank charges
LONDON: The U.K. competition watchdog the Office of Fair Trading has approached the High Court for a ruling on the overdraft charges levied by several major banks in the country.

The OFT has filed a test case in the court Friday against eight banks -- Abbey National, Barclays, Clydesdale, the HBOS group, HSBC, Lloyds TSB, the Royal Bank of Scotland and Nationwide Building Society. It said it felt the charges are unfair but the banks have a different view on the levy, which they charge when customers cross their overdraft limits. The customers have been vociferously opposing it claiming it is unauthorized and illegal. Some customers have already dragged the banks to court. The OFT had in fact been investigating into the charges since March this year.

The banks levy fines up to 39 pounds for a payment that is bounced. According to banking experts, this amount is much higher than the actual cost incurred by the bank -- which they say is as little as 2 pounds per case. They say the banks would have collected some billions of pounds through this charge.

The representative body of the banks, the British Bankers' Association (BBA), said the banks have been working with the OFT and regulator the Financial Services Authority in seeking a clarification from the court on the legal aspects of the charges. A spokesperson of the BBA said the banks are of the firm view that the fees they charge are fair and clear. She hoped the clarification from the court will give some clarity on the issue.

The banks are expected to approach the court to stay all proceedings initiated by customers in the matter until the court gives its ruling. Meanwhile, the Financial Services Authority has allowed the banks to stop making refunds of claims sought by the customers until a decision by the court is available. Several thousands of bank customers have claimed refund of the penalty they had paid.