More bad news for bank customers, as the City watchdog agrees to a six-month freeze on complaints about bank charges. Shame!
As you may be aware, millions of bank customers are unhappy with the charges levied on unauthorised overdrafts. If your current account becomes overdrawn without prior approval, or you exceed your overdraft limit without permission, then you can expect to pay hefty fines. In some cases, these can be the thick end of £40 per slip-up. Ouch!
However, last year, the Office of Fair Trading (OFT) decided to ride to the rescue of bank customers by taking legal action against eight banks and building societies. The OFT believes that these sky-high charges are punitive and unfair, which makes them illegal under the Unfair Terms in Consumer Contracts Regulations 1999.
The bad news is that this court case could go on for years, which means that we may not see a final outcome until, say, 2010. Last year, as thousands of bank-charges cases threatened to flood British courts, City watchdog the Financial Services Authority (FSA) decided to act. It imposed a twelve-month freeze on complaints concerning bank charges being heard by the courts or the Financial Ombudsman Service (FOS).
Another six-month freeze
Alas, the bad news for bank customers is that the FSA has agreed to a six-month extension to the waiver it granted a year ago. In other words, banks are off the hook and will not have to deal with these complaints until 2009 at the earliest. Thus, short-changed customers are once again prevented from taking formal action to recover disputed bank charges.
To me, this seems utterly unfair. I can understand why the regulator has decided to freeze complaints and refunds until the outcome of the court case concerning bank charges is known. However, this halt only affects customers, not the banks themselves. Indeed, they are free to continue charging these rip-off fees, making £300 million a month in the process!
So, while the legality of bank charges is being questioned, why are banks allowed to continue charging such ridiculous sums, yet customers are prevented from fighting back? Surely, the only fair thing to do would be to suspend all transactions involving bank charges until Mr Justice Andrew Smith issues his ruling?
Another failure by the FSA
Once again, it appears that financial regulators are far more interested in supporting banks and keeping things as they are, rather than in strengthening consumer protection. Indeed, with the next round of High Court hearings due to begin later this year, and appeals likely to continue well into 2009, it's 100% certain that the FSA will grant the banks further stays of execution.
Hence, I expect to see news of another extension to the bank-charges waiver in six months' time (mid-January 2009). Meanwhile, the banks will continue to rake in £10 million a day from these extortionate charges, and the worst-hit borrowers will face default notices and debt-collecting agencies.
Finally, if you're fed up with your bank, then don't just sit back and be a victim. Vote with your feet by switching to a Best Buy current account which charges sensible overdraft fees and interest rates. Thanks to an improved Banking Code, it's never been easier to ditch and switch!
More: Find cracking current accounts today! | It's Official: British Banks Are Bad | Fight Back Against Unfair Fines | Big Blow For Bank Charges Victims