As the Office of Fair Trading won a test case to establish that bank charges for unauthorized overdrafts come under unfair contract rules designed to protect consumers, 
United Kingdom of Great Britain & N. Ireland (Press Release) May 2, 2008 --
the UK’s leading independent debt resource centre, debts.org looks at what exactly does the High Court ruling mean for the millions of bank customers who’s financial woes have been compounded by crippling and unfair bank charges.
Although the ruling is only the first stage in what is likely to be a long and complicated legal battle, the ruling means the OFT now has the right to assess the terms and conditions underlying overdraft charges for fairness and decide whether unauthorised overdraft charges fall under the Unfair Terms in Consumer Contracts Regulations.
Ryan Howsnam, debts.org founder says: “The core argument here is that banks should only impose charges which are in proportion to their costs. This is because under ‘breach of contract’ laws, the charge should not exceed the cost of the breach. Yet go beyond your overdraft limit or have a cheque or direct debit payment bounce and the banks charge a penalty of up to £39 a time, even if you’re only £1 over the limit. Yet all it has to do is send a computer-generated automatic letter with a franked stamp, it is estimated this costs only between £2.50 and £4.50. And this is being generous. Plus a second element of law says if the bank is ‘fining you’ for going over the limit, and this fine is too high, then under the law of penalties this is ‘extravagant’.”
So what does all this mean for the consumer? Well, all in all, it means bank charges are unlawful, so as the banks had no right to grab your cash, but still did it, you’re entitled to get it back.
Debts.org is an independent resource centre for people serious about sorting their finances, and believe only the well informed can make the right financial decisions. Designed to increase your understanding across all areas of finance, debts.org champions the consumer so that you can make informative decisions when tackling debt.
For more information on how to best tackle debt problems, visit www.debts.org
Editor’s Note: debts.org is represented by online advertising consultancy, Top Position. Please direct all press queries to Billy Howe. Email: billy@topposition.co.uk or call: 0800 094 9001.
Although the ruling is only the first stage in what is likely to be a long and complicated legal battle, the ruling means the OFT now has the right to assess the terms and conditions underlying overdraft charges for fairness and decide whether unauthorised overdraft charges fall under the Unfair Terms in Consumer Contracts Regulations.
Ryan Howsnam, debts.org founder says: “The core argument here is that banks should only impose charges which are in proportion to their costs. This is because under ‘breach of contract’ laws, the charge should not exceed the cost of the breach. Yet go beyond your overdraft limit or have a cheque or direct debit payment bounce and the banks charge a penalty of up to £39 a time, even if you’re only £1 over the limit. Yet all it has to do is send a computer-generated automatic letter with a franked stamp, it is estimated this costs only between £2.50 and £4.50. And this is being generous. Plus a second element of law says if the bank is ‘fining you’ for going over the limit, and this fine is too high, then under the law of penalties this is ‘extravagant’.”
So what does all this mean for the consumer? Well, all in all, it means bank charges are unlawful, so as the banks had no right to grab your cash, but still did it, you’re entitled to get it back.
Debts.org is an independent resource centre for people serious about sorting their finances, and believe only the well informed can make the right financial decisions. Designed to increase your understanding across all areas of finance, debts.org champions the consumer so that you can make informative decisions when tackling debt.
For more information on how to best tackle debt problems, visit www.debts.org
Editor’s Note: debts.org is represented by online advertising consultancy, Top Position. Please direct all press queries to Billy Howe. Email: billy@topposition.co.uk or call: 0800 094 9001.
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