Home > Tradespeople > The Bank Overdraft Charges Ruling: What Does it Mean for Consumers?

The Bank Overdraft Charges Ruling: What Does it Mean for Consumers?

By: Sarah Clark (ILEX) - Updated: 17 Jun 2012 | comments*Discuss
Overdraft Unauthorised Overdraft Fee

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’s unlikely to be any respite from large overdraft fees except in cases of extreme financial hardship.

In November 2009, the Supreme Court ruled that terms of this legislation meant the charges levied under the Unfair Terms in Consumer Contracts Regulations 1999 for unauthorised borrowing were able to contest the charges as a rule, or whether the fees were just one of those things and something that customers just had to put up with if they used banking services and overdraft facilities – in which case, the OFT who has taken up the case against seven banks and one building society would not have the power to decide whether the charges actually were fair or not.

The decision will come as a disappointment for 1.2 million bank customers who have lodged claims on unauthorised overdraft fees paid on their current accounts. Some of these claims date back as far as 2001, but a decision had been delayed until after this case was decided.

Customers Complaints about Unauthorised Overdraft ChargesThere has been no action on overdraft charge complaints recently, while this case has been pending, as the finance sector was waiting to see what the result of the case was. It seems that if you’ve made a complaint already, you can now expect it to be looked at, as the Financial Services Authority (FSA) has said that the moratorium on handling unfair charges claims had now been lifted. If you made a claim to your bank for a refund of overdraft fees, it should be dealt with within eight weeks of the judgment, which was given on 25 November 2009.

Individual Banks

Lloyds have said that they would be contacting any customers who had claimed (the Lloyds group also includes Bank of Scotland and Halifax) but that unless they were suffering from financial hardship they would probably not be getting any of their money refunded.

The same applies to Abbey, although they did go one step further and suggest that even after this decision it was still worth contacting them if there was financial hardship.

Financial Hardship

Around 10,000 people have complained to the Financial Ombudsman about bank overdraft charges because their complaints have been rejected by their individual bank, and around half of the people who made a complaint were actually deemed to be suffering from financial hardship, so there is hope for these people being rejected by their banks.

Banks had already started to work on changing the way they charged people for unauthorised overdraft facilities, in anticipation of the outcome of the case and as a result of the negative publicity surrounding it. So that could mean some comfort for people in the future – but unless you can prove that you suffered from extreme financial difficulties at the time that your overdraft fees were spiralling, it’s unlikely that you’ll get any help at all from the banks.

The British Bankers' Association was understandable happy about the decision, although he did acknowledge that court had left it open to the OFT to challenge these unauthorised overdraft fees again if it could find another way using different consumer legislation.

The Office of Fair Trading

The OFT issued a statement saying that “disappointed” by the ruling, which had in effect overturned the previous high court and court of appeal rulings giving them to powers to assess unauthorised overdraft fees to see if they were fair.

It’s continuing to look into the issue, and has said that it will be exploring all of the implications for consumers, as well as for existing and future legislation and regulation. There should be a further announcement from the OFT in December 2009 – watch this space!

You might also like...
Share Your Story, Join the Discussion or Seek Advice..
my Bank let me exceed my overdraft by a substantial amount, my question is should this have been allowed, should they not have stopped me drawing money
jap - 17-Jun-12 @ 11:33 AM
Share Your Story, Join the Discussion or Seek Advice...
(never shown)
(never shown)
(never shown)
(never shown)
Enter word:
Latest Comments
  • Sheena
    Re: When Appliances Go Wrong
    I bought a fridge freezer online ten months ago and yesterday the freezer broke a and all my food defrosted and wasted. The company…
    19 January 2021
  • Mum
    Re: What Are my Rights on a Faulty Television?
    Hello, I bought a Samsung TV 49 inch Argus store two years ago, I didn't buy insurance I don't know what to do…
    17 January 2021
  • Samsung tv
    Re: What Are my Rights on a Faulty Television?
    I bought a Samsung TV two in 2018 in November, it broke after three days, it slowly faded and the screen went…
    15 January 2021
  • Andy
    Re: Leasing A Car Explained
    I have leased Fiesta diesel supplied with fitted dual controls used as a Driving school car. I have had it from new, the lease was 36…
    15 January 2021
  • Junaki
    Re: Dealing With Cowboy Builders
    Stefan from Gumtree. A so called plasterer. He skimmed my living room ceiling without prepping it and after a week it cracked and…
    13 January 2021
  • Alif
    Re: Dealing With Cowboy Builders
    Any recommended solicitors to launche a case against rogue builder that did not complete the job? The bit he did was unsatisfactory.
    8 January 2021
  • Mamatiger24
    Re: Experience Voucher Expired: Can I Get a Refund?
    I was given a virgin experience voucher in dec 2019. I have been unable to use it due to the covid…
    8 January 2021
  • netter
    Re: Am I Entitled To A Refund?
    Bought tv online 29th nov and then picked up instore for christmas present didnt open to check tv. Opened after Christmas which was…
    7 January 2021
  • Ash
    Re: Loyalty Cards: What to Expect
    I received a receipt when filling up for fuel yesterday’s BP saying congratulations you’ve won 400,000 points = to £2,000 I’ve…
    6 January 2021
  • Dee
    Re: Dealing With Cowboy Builders
    Anyone out there with a park home...do not use smart park homes .skelmersdale...as they are cowboys...they are ripping elderly…
    4 January 2021