Shock overdraft charges ruling in favour of the banks

Shock overdraft charges ruling in favour of banks Following on from an earlier news story released by Constructaquote.com, the Supreme Court has ruled in favour of the banks in the overdraft charges case this week much to the surprise and disappointment of many small businesses.

One of the Justices overseeing the case, Lord Phillips, made the announcement that the Supreme Court had ruled in favour of the banks and that they are permitted to continue to charge huge fees for those that exceed authorised overdrafts. However, he went on to state:

"It may be open to the Office of Fair Trading to assess the charge under other criteria."

This decision has overturned two previous court decisions in favour of the Office of Fair Trading (OFT), which has long maintained that the charges are unfair under contract law.

In a 2008 market study the OFT found that ‘banks earn a third of their revenue from unarranged overdraft fees that are difficult to understand, not transparent and not subject to effective consumer control.’

The banks argued that they would suffer huge amounts of litigation if they were to lose the case. A ruling in favour of the OFT would have resulted in a loss of around £2.6 billion in annual income for the banks.

Many have recently speculated that the law has been wilfully misinterpreted in order to avoid causing further financial issues for the banks despite the fact that they are now part-owned by the tax payer.

Many small businesses have encountered significant issues with overdraft charges due to a large number of small business owners running their companies with personal debt. Based on the outcome of this case it appears that this will continue to be a problem.

Despite this ruling the Exchequer Secretary to the Treasury, Sarah McCarthy Fry, has announced that they will work with the OFT and Financial Services Authority (FSA) to reach a new framework for fairer bank charges.

The OFT have expressed their disappointment in the outcome of this case and have announced that they would need to consider the detail of the ruling before making a final decision on whether or not they should pursue the investigation.

26/11/2009 10:04:09 Comments 1

Comments

TO THE OFT, I say PLEASE carry on, to Parliament if necessary, for the sake of ALL the people who suffered this robbery. They were, after all the one's who could least afford to be ripped off, again, by the banks.
Enough is enough, we are all fed up with propping up banks with our tax and then being kicked in the teeth by them. They want it all ways.
Fight them all the way !!!

by Peter - 01/12/2009 08:15:49

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Constructaquote.com is a trading title of Moorhouse Group Ltd which is authorised and regulated by the Financial Services Authority. The Financial Services Authority's Register can be accessed through http://www.fsa.gov.uk/Pages/register Reg No 308035.

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