Bank charges claims delayed again

Thousands of savers who are pursuing their banks over unfair overdraft charges have been told they will have wait at least six months more to learn if they will receive compensation.

The Financial Services Authority (FSA) announced today that it is extending the waiver that allows banks not to pay out on claims.

The waiver was introduced in July 2007 when the Office of Fair Trading (OFT) started a court action to prove that high charges for unauthorised borrowing are unfair. It was due to expire next Monday, but the court case is far from complete and the FSA has said that it will allow banks to put claims on hold for a further six months.

Dan Waters, director of the Retail Policy & Conduct Risk Division, at the FSA, says: “Our objectives continue to be certainty over this complex issue, and a fair and consistent resolution of consumer complaints about unauthorised overdraft charges. The FSA has reviewed the prevailing circumstances and has decided to offer firms an extension to the waiver, to run for up to six months.”
While the waiver is in place the Financial Ombudsman Service has agreed not to proceed with complaints. Cases in the county courts have also been put on hold. The FSA can revoke the waiver at any time if the situation changes.

The waiver applies to almost all banks and building societies with current accounts - 98 per cent of the market, according to the FSA. To check whether your bank or building society is covered by the waiver visit here.

The hold on claims was sparked by a legal challenge by the OFT against eight institutions responsible for the majority of the UK’s current accounts, including Barclays, HSBC, Lloyds TSB and the Royal Bank of Scotland.

The OFT is seeking a court ruling that unauthorised overdraft charges are unlawful under consumer regulations introduced in 1999. It estimates that the banks earn £2.6 billion a year from the charges.

In April, the OFT won the first stage after the High Court rejected the banks’ claim that the regulations did not apply. This prompted the banks to ask the Court of Appeal to overturn that decision. The Court of Appeal’s judgment has yet to be handed down.

Martin Lewis, of MoneySavingExpert.com, a financial website, says: "This means people are still sitting on their hands, unable to try to reclaim money which was taken from their accounts without their permission, while the banks continue to make hundreds of millions of pounds in charges and take bailouts from the Government.

"Paying out to consumers now could free up cash for spending to boost the economy, but how long are people expected to wait? A further year? Until it goes all the way to the European Court? With the economic slowdown, the credit crunch, inflation and house prices falling, this hold adds to the woes."

However, some consumer groups have welcomed the extension of the waiver because it means that claims can be made going back for a longer period.

The rules state that you are able to make a claim for charges incurred over the past six years. As long as the waiver is in place, consumers can claim charges dating back to July 2001.

http://www.timesonline.co.uk/tol/money/savings/article5566136.ece

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Bank charges claims delayed again