"Violation"
‘Illegal’ overdraft fees cost bank customers an average £742 each
Bank customers have paid out an average of £742 in “illegal” penalties over the past six years, it was claimed yesterday. About 18 million of the banks’ 45 million customers have been charged penalties, some as high as £39 a day, since 2001.
The figures emerged as more than one million customers seeking refunds of £713 million in disputed charges have had their claims frozen until a test case is resolved in the High Court.
New research for the price comparison website uSwitch.com revealed that 38 per cent of current account customers had been penalised by bank charges, totalling £12.4 billion over the past six years.
About one person in 20 had been charged at least £2,500 – more than £1 for each day they held their account. The charges were imposed for bank account breaches such as unauthorised overdrafts, bounced cheques and unpaid direct debits.
According to the uSwitch poll, which surveyed more than 4,000 consumers and was carried out by YouGov, the worst offender was Abbey, where the average charges for customers added up to £1,376 – or £230 a year.
That compared with average penalties of £800 at Lloyds TSB, £731 at Barclays and £585 for HSBC and First Direct over the past six years.
However, the British Bankers Association called the figures “nonsensical” and accused uSwitch of using “fag-packet figures”.
Angela Knight, the association’s chief executive, said uSwitch was making “very partial use of bad statistics and then using them to present UK banks in as bad a light as possible”.
Eddie Weatherill, spokesman for the Independent Banking Advisory Service, said: “As an average, £742 might sound relatively reasonable. But I’m dealing with a case at the moment of someone who was charged £300 in a month and a half.”
Banks have recently refunded £2.6 billion to about 4 million customers after threats that they would be taken to court. The issue over whether the banks can pass on such charges to their customers will be decided by a test case between the British Banking Association and the Office of Fair Trading at the High Court, which begins in January.
In the meantime, uSwitch said there would be a block on claims that would remain in effect until next year, following an order from the Financial Services Authority.
Paul Reuben, 33, of West London, said he had been waiting more than a year to resolve his claim for overdraft fees charged on his current account with Abbey. He was charged £50 each time he exceeded his agreed overdraft because of a direct debit payment. This happened about eight times in six years. He said the situation was very frustrating and he had no idea what his rights were.
It has been calculated that the freeze will give the top five banks a £20.5 million windfall in interest on unpaid refunds.
Which?, the consumer group that has spearheaded the campaign against bank charges, said: “The banks could have saved us all this time and money and simply opened their books a year ago and showed us what it really costs to administer a simple unauthorised overdraft charge.”
A county court judge in Luton ordered Barclays to continue refunding overdraft charges this month after a woman complained of financial hardship during the suspension.
Charges on trial
Inquiry The consumer watchdog, the Office of Fair Trading (OFT), began an inquiry in September 2006 into the charges levied on current accounts after several high-profile public awareness campaigns by consumer organisations
Payback Anticipating the possible outcry from customers, and attempting to avoid thousands of court cases, banks and building societies have paid out about £200 million so far this year in refunds to customers. Many claims have already been settled out of court
Courts The OFT began a test case in July on the legality of overdraft penalty fees in the High Court. If the ruling goes in favour of customers, it could cost the banks £10 billion.
(Published by Times Online, August 31, 2007)
______________________