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BALLOT: Banks win overdraft charge battle


High Street banks have won their appeal over unauthorised overdraft charges.

The Supreme Court ruled in favour of the seven major banks and a building society, which had challenged High Court and Court of Appeal decisions that the charges come under "unfair contract" rules and are therefore subject to regulation by the Office of Fair Trading.

The result was awaited by tens of thousands of customers whose refund claims have been frozen while the test case went through the courts.

Handing down the unanimous ruling Lord Phillips, president of the Supreme Court, said: "It may be open to the Office of Fair Trading to assess the charge under other criteria."

Customers who go into unauthorised overdraft or breach their agreed limit can be charged as much as £35 or more for a single bounced payment.

Campaigners claim the actual cost to the banks could be as little as £2.50.

Your Vote

Should banks be able to charge what they want for unauthorised overdrafts?

Yes:
Blue bar used for ballot results 41%

No:
Yellow bar used for ballot results 59%


If the banks had lost the test case, it could have cost them £2.6 billion a year in lost revenue and led to their having to make refunds of up to £1 billion.

Before refund claims were frozen, banks had already paid out more than £559 million to customers who complained about "rip-off" overdraft charges.

But many of the high street banks have already changed the structure of the fees they charge people who go into the red, with or without permission.

Lord Walker, one of the five Justices of the Supreme Court who heard the case, pointed out that the outcome of the appeal "may cause disappointment and indeed dismay to a very large number of bank customers who feel that they have been subjected to unfairly high charges in respect of unauthorised overdrafts".

But he said that as Lord Phillips had explained it was not the end of the matter and Parliament "may wish to consider the matter further".

The test case to decide the legal issues thrown up by the dispute was brought jointly by the OFT and Abbey, Barclays, Clydesdale, Halifax Bank of Scotland and Lloyds TSB - which are now part of the same group - HSBC, Royal Bank of Scotland Group and Nationwide Building Society.


Your Say Your Worcester

crowquill, Pershore says...
11:20am Wed 25 Nov 09

No surprise there then!
This whole country is now more corrupt than a banana republic.
The whole system is geared to screwing honest hardworking people.
I think we should all withdraw every penny we have from the banks and screw them!


PaulMeUnder, Worcester says...
11:53am Wed 25 Nov 09

Don't go into your overdraft, be responsible with your money, have savings, live within your means.

There are other ways to avoid paying expensive bank charges, of course these ones require a degree of personal responsibility and don't rely on supreme court rulings in your favour!

Pomygranit, St Johns says...
11:57am Wed 25 Nov 09

PaulMeUnder wrote:
Don't go into your overdraft, be responsible with your money, have savings, live within your means.

There are other ways to avoid paying expensive bank charges, of course these ones require a degree of personal responsibility and don't rely on supreme court rulings in your favour!
Could not agree more.

By the way Crowquill I am honest & hardworking, just do not spend what I have not got.

Vigornian, Worcester says...
2:44pm Wed 25 Nov 09

The best decision in my view. I am glad to see the Supreme Court make such a common sense decision. Everyone knows that if the banks failed in their bid, it would have signalled the end of free current accounts. Therefore the majority of us who handle their financial affairs correctly would have been penalised because there are those who go overdrawn without getting authorisation from their bank in the first place. People know that when you sign up to a current account, you sign up to the terms and conditions that stipulate what the charges are for unauthoirised withdraws. The simple truth is that if you do not wish to pay these charges in the first place, handle your finances better.

jovialcommonsense, worcester says...
3:26pm Wed 25 Nov 09

Surely, "unauthorised" overdraft is akin to shop lifting.

Olga, Worcester says...
4:48pm Wed 25 Nov 09

Remember:.....
The Bank is actually your enemy that you have to deal with, they don't really want "Good" customers who manage their finances well, they want normal people who make mistakes and forget things occassionally.
Please remember that a Bank is like Sweeny Todd, all nice and warm and cuddly with "so nice" adverts - but in reality it is waiting to slit your throat and sell whats left....

When dealing with this Tiger in disguise it is your duty to treat them with comtempt and treat them as you expect them to treat you - but do it first and do it harder.
Free banking wouldn't have ended anyway, there is too much competition for the business and the banks all sit on vast amounts of our cash with a well rigged delay system to allow many days of free use for them each year.

jovialcommonsense, worcester says...
5:43pm Wed 25 Nov 09

Olga, that's the same as any business then.
If we only bought the items we needed and at as cheap a price as possible they would not make any profit on the "luxury" items we all want.
Without profit all would fall apart and where would we then get what we need/want?
Back to the cave......

consider_this, Worcester says...
11:47am Thu 26 Nov 09

I think that to a certain degree most people are correct - if you manage your finances properly then you can escape these charges. My gripe, and I think it is fair to be annoyed about, is the fact that the charges levied are the same regardless of how much you go overdrawn. So, for example, when I was quite a bit younger, I went overdrawn by 76p, because one card transaction I made came out a few days after I bought the item. When I used it the next time (thinking I had enough for something - after checking my balance) it went through, but made me go overdrawn by 76p. I was charged £29 for this error - despite the fact that I was in the red for 1 day - I was paid the next day. Do you not agree that this is excessive? Equally, should the second transaction have been denied because of the lack of funds? I think it should have been, but it wasn't. Did I get a letter from the bank saying "you're overdrawn"? No. So why does it cost them £29. This is the whole premise of the OFT investigation, not that people should not have to pay because they're overdrawn, simply the amount that they are charged when they do go overdrawn.

drbeat, Kidderminster says...
7:04pm Thu 26 Nov 09

Couple of things to point out (particularly to the 'manage your account better' brigade'):

1) The decision was about whether the OFT could rule on the matter...not about the charges being legal per se. The fight continues!

2) Banks SHOULD NOT impose an informal overdraft (it's not called unauthorised and no bank uses such a term) on people! When you have no money that should mean YOU HAVE NO MONEY! You should be declined at ATMs and at the till of tescos etc! Allowing people to go up to 600 pounds OD and then charge them £300 for the pleasure is akin to loan sharking! It would be cheaper to go to payday loans for the money!

3) Free banking has been supported by a number of things that include these disgusting charges! If you enjoy free banking then you should be thanking those who have been charged for using an informal overdraft!

4) The UK banking system was saved by the UK Taxpayer, their kids and their future grand kids! Not all banks were bailed but had HBOS and RBS gone down the tubes they would have taken the other vultures with them!

To the do-gooders (Free Riders) get a grip! You savers and non-OD users are a thorn in the side to the banks! They make money by creating debt and charging Interest on that debt! They don't use your savings to do that! The amount of debt (money created from nothing) they can create is BASED on the Fractional Reserve of what is in the vaults...THAT IS ALL! Banks like HBOS and RBS exceeded that fraction by over 100%!!! Read up on the Fractional Reserve System and wake the hell up!

To the terrible nasty informal overdraft users: you've kept banking free for a number of years but I believe you will at least get half your money back!!! Thanks for supporting my free banking!!!

drbeat, Kidderminster says...
7:13pm Thu 26 Nov 09

I should have written 'Four things to point out'...not couple. Sorry!

JBLM2008, Worcester says...
1:10pm Mon 30 Nov 09

consider this actually makes a very valid point, if you pay with a debit card in Tesco for example it can take 5 days to be debited from your account, T-mobile once took 3 weeks to debit my account and i was faced with the same problem when i checked my balance and saw i had a few pence in my account when i was expecting around £150.00 to be in there i queried this with my bank and T-mobile as i thought when i made a payment with a DC it would come out straight away however depending on the bank/company you use depends on whether the funds in your account are allocated straight away so your balance will be less but doesn't show on a mini statement/online banking who the payment's gone to so it's worth checking these things out because having that happen to me once it has made me much more vigilant about checking my account and keeping an eye on my finances alot better!

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