Bank charge waiver extended until 2009
Victims of unfair bank charges will have to wait until at least 2009 to claim any refunds after the financial regulator extended a complaints waiver for another six months.
The Financial Services Authority (FSA) put the original 12-month waiver in place in 2007, but this expired on 26 July. In light of the ongoing battle between the Office of Fair Trading (OFT) and Britain’s biggest banks, the FSA has extended the waiver. It will be reviewed in early 2009.
Despite the High Court finding in favour of the OFT earlier this year and ruling that it has the right to decide whether overdraft charges are too high, the case rumbles on with the Court of Appeal currently considering the issue.
Dan Waters, director of retail policy at the FSA, says that by the time the new waiver expires in six months' time, a decision should have been reached by the Court of Appeal. However, the regulator has the right to revoke the waiver at any time if it is no longer appropriate.
The waiver means that any bank of building society signed up will not have to process any type of complaint relating to bank charges. Around 98% of the market signed up to the original waiver.
“The FSA continues to work closely with the OFT and banks in reaching a resolution on the fairness of unauthorised overdraft charges,” Waters says. “Our objectives continue to be certainty over this complex issue, and a fair and consistent resolution of consumer complaints about unauthorised overdraft charges.”
An overdraft is an agreement with your bank that authorises you to withdraw more funds from your account than you have deposited in it. Many banks charge for this privilege either as a fixed fee or charge interest on the money overdrawn at a special high rate. Some banks charge a fee and interest. And other banks offer a free overdraft but impose very high charges for exceeding the agreed limit of your overdraft.
The Financial Services Authority is an independent non-governmental body, given a wide range of rule-making, investigatory and enforcement powers in order to meet its four statutory objectives: market confidence (maintaining confidence in the UK financial system), financial stability, consumer protection and the reduction of financial crime. The FSA receives no government funding and is funded entirely by the firms it regulates, but is accountable to the Treasury and, ultimately, parliament.
This is a mutual organisation owned by its members and not by shareholders. These societies offer a range of financial services but have historically concentrated on taking deposits from savers and lending the money to borrowers as mortgages, hence the name. In the mid-1990s many societies “demutualised” and became banks. One academic study (Heffernan, 2003) found demutualised societies’ pricing on deposits and mortgages was more favourable to shareholders than to customers, with the remaining mutual building societies offering consistently better rates. In 1900, there were 2,286 building societies in the UK; in 2011, there are just 51.