subject: What does the recent Supreme Court case on bank charges mean for consumers? [print this page] What does the recent Supreme Court case on bank charges mean for consumers?
Banks earn around a third of their retail revenues from unarranged overdraft charges that are "difficult to understand, not transparent, and not subject to effective consumer control" (Office of Fair Trading).
In November 2009, the Supreme Court ruled in the case of Office of Fair Trading v Abbey National Plc & Others [2009] that unauthorised overdraft bank charges were not unfair under the Unfair Terms in Consumer Contract Regulations 1999. This will disappoint many consumers who have attracted high overdraft charges.
Despite previous hopes that a Supreme Court judgment would offer a lifeline to people who feel as though they have been ripped off by excessive bank charges on overdrafts, it seems that the charges have been declared legal and there is unlikely to be any respite from large overdraft fees.
In the case, Lord Phillips stated that bank customers agreed to pay overdraft charges as part of the prize of having a current account, so they fell outside the scope of the 1999 consumer contract regulations. Bank charges can thus no longer be challenged on grounds of unfairness.
Legal aid and debt are two terms that are getting rarer and rarer over time, however Duncan Lewis still has some client matter starts and is able to help give you legal debt advice under the legal help scheme should you be eligible for legal aid.
What will this mean for Consumers?
The Supreme Court did not make a definitive ruling on the fairness of charges being legal if a case was brought under grounds other than Unfair Terms in Consumer Contract Regulations 1999.
The ruling does not affect credit card charges. Furthermore, those in Hardship do have some recourse. Consumers may be able to qualify for a refund or reduction in bank charges if they come under the Hardship rules.
The Financial Ombudsman has asked the banks to handle account charges "fairly and efficiently" and to adhere to their Banking Code for financial hardship' cases.
A consumer is deemed to be suffering from financial hardship if they are struggling to meet their commitments each month. This can be further compounded by the banks adding interest and charges for late or missed payments.
Further examples of financial hardship are if you are not able to meet your basic needs with the money you have coming in and you are behind with Council Tax or court fines, you are about to have your home repossessed or your only income is derived from benefits.
The Banking Code and Guidance for subscribers Code' detail what may qualify as hardship. These are voluntary codes which set the standards of good banking practice, providing valuable protection for consumers. Section 2 of the Banking Code states that banks "will consider all cases of financial difficulty sympathetically and positively", section 4 further reiterates this.
There is further recourse to clients if banks do not comply with the above. A complaint can be made to the Financial Ombudsman (only after the internal complaints procedure has been exhausted), who will then investigate the matter; each investigation will result in the banks having to carry the burden of costs themselves. Thus they are usually inclined to provide a resolution during their own internal complaints procedure.
Unplanned overdraft fees can of course be avoided if consumers check the terms and conditions of their agreement, check their credit limit, manage their financial affairs ensuring they do not exceed their overdraft limit.
Are you experiencing any of the above? Duncan Lewis can offer you advice on Budgeting or assistance with reclaiming bank charges due to hardship. Duncan Lewis has an experienced debt team, which has many debt solicitors, debt trainee solicitors and debt caseworkers. For more information in debt law at Duncan Lewis please contact us on 020 7923 4020.
