Bank charge refund waiver extended
The freeze on bank charge refunds has been extended for a further six months as the House of Lords considers the legal battle between the consumer watchdog and seven of the UK’s biggest banks.
The legal dispute started two years ago, when the Office of Fair Trading and the banks agreed to ask the courts to decide whether the former has the right to decide if overdraft charges are fair or not, and whether it can then use its powers to cap these. Despite the High Court and the Court of Appeal both finding in the OFT’s favour, the banks have pushed their appeal to the House of Lords for consideration.
However, bearing in mind the Peers may not make a decision for several years, and could even refer the matter to the European Commission, the Financial Services Authority (FSA) has extended a waiver (initially put in place in 2007) removing the obligation of banks to deal with complaints and refund requests surrounding unauthorised bank charges until a final decision is reached. This is the third time the waiver has been extended, and will now remain in place until January 2010.
The FSA says the waiver, which covers around 98% of the market, has been extended because banks and building societies are still confused over how they should respond to complaints about unauthorised overdraft charges.
Dan Waters, director of retail policy and conduct risk at the FSA, says: “Although the test case is progressing well, we still do not have certainty on this complex issue.”
He adds: “Our objective continues to be facilitating a fair and consistent resolution of consumer complaints about unauthorised overdraft charges.”
The waiver could be revoked at any time if the FSA considers it no longer appropriate; in addition, banks can approve refunds for customers considered to be in financial hardship.
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.