FSA contacts banks over charges

02/10/2009

The Financial Services Authority (FSA) has asked British banks for their contingency plans in case they lose the ongoing overdraft charges test case.

Regulators want to know how repayments to customers previously charged penalty fees for exceeding their overdraft limits might be made by the financial firms, the BBC reported.

The supreme court, the UK's highest legal authority, will soon rule on whether or not the Office of Fair Trading (OFT) has the power to judge the fees' fairness.

If the decision goes against the banks, they could be on the hook for billions of pounds of repayments to hundreds of thousands of customers.

Prior to the test case being called in mid-2007, the £35-a-time charges for offences such as exceeding overdraft limits had been the subject of considerable consumer unrest.

Commenting on the FSA questionnaire, Nick Spooner at campaigns group Legal Beagles told the broadcaster that momentum was now against the banks and indicated that a court finding in favour of the OFT was likely.

"Due to the amount of fine detail required by the questionnaire, it can only be interpreted as a sign of the inevitability of the charges having to be refunded," he said.

RBS and Halifax have both recently announced changes to their overdraft fees policy, which will lead to many customers being charged less than before.

Commenting on the news, EuroDebt director Kevin Still said: "Should consumers start to receive refunds on excessive bank charges then they will need to look at how these funds are used, especially if they are in debt. It may be prudent to look at paying off overdrafts or credit card debts that may have accrued.

"EuroDebt has launched a prepaid current account for people in financial difficultly to help with budgeting and avoid transactional charges for failed payments. The facility is available to all UK residents without the need for a credit check. You are still eligible if you starting a Debt Management Plan, an IVA or subject to bankruptcy. There will be an inevitable backlash from any retrospective refunds paid by the banks. We have made bank switching simple and with no surprises - just visit www.bankswitching.co.uk."

Tags; Debt Management and Banking, Retirement Money Problems, Credit Card Lifestyle, Recent Graduate Debt,

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