MPs must make next move on bank charges
The Office of Fair Trading has decided to end its legal fight on unfair bank charges. It's now up to MPs to continue the fight.
The Office of Fair Trading (OFT) said today that it was giving up its legal fight to stamp out unfair bank charges.
This is the second piece of bad news for bank charges campaigners within a month. Back in November, the Supreme Court said that a particular clause in the Unfair Contracts Regulations didn't permit the OFT to decide whether bank charges were fair or not.
After the ruling there was speculation that the OFT might go back to the courts and argue that a different regulation gave it the power to continue the fight. But today the OFT has said any further legal moves would have 'low prospects of success.' As a result, the OFT won't be going back to court.
This is very disappointing news, but the saga isn't necessarily over yet.
For starters, it's possible that some claimants might still be able to get compensation. The OFT has said that some individuals might be able to bring successful cases under the Consumer Credit Act. The claimant would need to show that there was an 'unfair relationship' between the bank and the customer, and the court would probably want to look closely at the individual circumstances of the consumer - was there something about the consumer's circumstances that made the relationship with the bank particularly exploitative?
I should stress that there's no certainty that any cases using the Consumer Credit Act will succeed. It's too early to say how things will pan out, but I'll carry on monitoring the situation.
The OFT also said that people with unresolved claims should wait for guidance from the FSA and the Financial Ombudsman Service, so I'll look out for those statements too.
The other important issue is the level of bank charges in the future. We have seen some cuts in bank charges this year but there is plenty of room for further improvement. The banks may make further voluntary cuts, but if those cuts aren't large enough, it's up to MPs to make the next move.
Parliament should pass legislation in 2010 forbidding banks to levy punitive charges when customers go into the red without authorisation. The banks should also be forced to make their overdraft charging structures much more transparent to their customers.
The consumer has a role too. If you're not happy with the way your bank is treating you, switch! If you're not sure about which bank might be best for you, why not wander over to our Q&A platform and ask other lovemoney.com members for hints and tips about what worked best for them?