The Office of Fair Trading (OFT) has today announced that it will not pursue further legal action over unfair bank charges. After last month’s unexpectedly negative Supreme Court verdict, it has conceded that a further challenge to unarranged overdraft charging terms has ‘low prospects of success’.
It had been thought that the OFT might continue to challenge overdraft charges under the Unfair Terms in Consumer Contract Regulations 1999 but in an announcement today the regulator admitted that such action would have ‘a very limited scope’ and was unlikely to succeed.
Disappointment for bank charges reclaimers
Commenting on the decision, OFT Chief Executive, John Fingleton said: ‘The Supreme Court judgment was not the outcome we had hoped for and was disappointing for many bank customers.
‘Having now considered in detail all the options available to us in light of the judgment, we have decided not to continue what would be a narrow investigation with limited prospects of success.’
Concern over current account market
Mr Fingleton went on to say: ‘We remain deeply concerned that the market for personal accounts is not working well for consumers and does not give banks sufficient incentives to compete.
‘We are committed to securing significant changes to unarranged overdraft charges going forward, whether through voluntary agreement with the banks or by other means. Customers can play their part by looking for value for money and switching accounts if necessary.’
Government action on bank accounts
In the recent Pre-Budget Report, the government also called for changes, hinting at legislation if voluntary reforms were not implemented:
‘On 25 November, the Supreme Court ruled that the OFT could not assess the fairness of bank charges for people who are overdrawn. The Government recognises that this outcome was disappointing for many consumers and is clear that the charging structure of the banks needs to change in the future. The Government will work with consumer groups, the OFT and the banks in order to agree a new framework that will make bank charges fairer, simpler and more transparent in the future. The Government will take action to deliver change if a voluntary approach does not result in a fair outcome for consumers.’
Which? response to the OFT’s announcement on bank charges:
Responding to the OFT’s announcement, Which? chief executive, Peter Vicary-Smith, said:
“Consumers have been left confused by this decision. It looks like the big refund war is over but there is a narrow possibility that some people might be able to claim back their bank charges. The situation needs clarification and we’re looking into it as a matter of urgency. We’ve been fighting against unfair bank charges for many years and will continue to try to get redress for consumers.
“Meanwhile, people should sit tight and avoid claims handlers, who’ll charge a large fee for doing something you could do yourself.”