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BANK CHARGES: THE STORY SO FAR

JSK Claims have been monitoring the bank charges saga for a long time. We have written several articles and attended the High Court and Court of Appeal recently to follow the Judgments handed down against the banks. We have summarized the story so far from the initial High Court ruling to the latest Court of Appeal Judgment.

The Hgh Court Victory in 2008

The attack on bank charges started a few years ago and many customers were successful in getting back all default charges. The general argument put forward was that the charges have to be fair. To charge £25.00 for going a few pence over is quite shocking but it has happened to all of us.

However, in the summer of 2007, one Judge in the midlands favoured the bank's argument that such charges were for a service and therefore no refund would be allowed. It was a crucial judgment because it gave the banks a strong weapon to then start defending all the claims.

The Office of Fair Trading which assists consumers, decided to resolve the issue once and for all with a legal ruling. Several high street banks and one building society agreed to have a 'test case' at the High Court in London to decide whether the banks' charges can be challenged under the test of fairness.

After several days of argument, the Judge decided that the Office of Fair Trading can assess the charges and this was a terrific victory. Consumers celebrated and the banks were left with a tough pill to swallow.

However, the banks decided to appeal to the Court of Appeal.

The Court Appeal Feb 2009

Having decided to appeal against the decision of the High Court, the banks forged ahead with an appeal to the Court of Appeal. Consumers became upset at the fact that the banks didn't just throw in the towel and offer people refunds.

During the build up to the appeal, there were some rather telling signs. Banks such as Barclays and Halifax decided to drop their charges from £25.00 to £8.00. This was a huge reduction and a strong signal that the banks were gearing up to a full revamp of the charging structure. It is a shame other banks didn't follow suit.

In November 2009, three appeal Judges at the Court of Appeal heard the banks' appeal and dismissed it. It held that the banks charges can be assessed under the test of fairness by the Office of Fair Trading. It was great news and it confirmed that the legal position was clarified.

Further good news came as the Court of Appeal refused permission to the banks to appeal to the final court in the land- the House of Lords. This is a crushing blow for the banks as it indicated that the Court of Appeal did not feel the banks had an arguable case.

Even though permission to appeal wasn't granted, the banks still have the option of asking the House of Lords directly for permission to appeal.

Regardless what the banks can or cannot do from here on in, the Office of Fair Trading will now get on with assessing the charges and just like it did with credit cards, it will have to decide what exactly is a fair charge to impose as a default fee.

Either way there will still be a delay but consumers who have yet to claim have to get in the queue now by staking a claim.

The only method by which a claim can be put without having to wait is if a consumer is suffering financial hardship. We have explained this in our next article below.

Financial Hardship

It is possible to get around the current stay on bank charges if a consumer is suffering financial hardship.

The FSA has not defined what exactly this is which has caused some confusion but from our experience a number of factors can be taken into account.

Loss of employment certainly will be classed as an exceptional factor. Also, if there is a real struggle to meet bill payments such as utility bills then this will also strengthen the claim under hardship. A consumer with a family struggling to meet mortgage payments is also a sound example. County Court Judgments also apply as strong factors.

Merely having expenses which outweigh income wouldn't classify as a hardship situation so it has to be something pretty exceptional.

It is important to remember that simply applying for a refund of charges as a financial hardship does not necessarily mean that the banks will smile and pay out. Many such cases are rejected and we regularly refer such cases to the Financial Ombudsman Service.

If you feel that you are suffering financial hardship then please let us know and we will do everything we can to help.