MoneySavingExpert.com is today relaunching the campaign on unfair bank charges reclaiming. We've taken advice from a top banking QC and believe there is a strong new legal argument.
Yet it is complicated so we believe the best route forward is for the Office of Fair Trading (OFT), that took the test case against the banks, to take up the fight so we can finally have clarity.
Following the recent Supreme Court ruling, where the banks and building societies emerged victorious, we have obtained advice from leading banking barrister Raymond Cox QC.
Given what we believe are strong new legal arguments, we have published a new reclaiming guide (see the Bank Charges guide) for consumers wanting money back to explain the latest news and what to do and not to do.
The new argument
The original case had a very narrow scope, and only fell on a technicality at the last stage. As well as the new argument based on a broader interpretation of that rule, the blockbuster new approach is to challenge charges' fairness under the Consumer Credit Act.
This was never raised in the test case and importantly means the burden of proof is on banks to prove charges are fair rather than customers having to prove they're unfair (see the Bank Charges guide for full details).
We urge the OFT to act
The OFT is still deliberating whether it will take further action. We have informed it of the new legal argument and we believe it's in the public interest it picks up the baton and restarts action.
- Political support is strong. This action has a wide range of support. Lib Dems leader Nick Clegg is calling for the OFT to act while the Conservative Shadow Treasury Secretary believes the it should investigate what powers are available to it and launch an investigation.
- Could the FSA act too? Current accounts must currently be fair when in credit because they're regulated by the FSA but not when overdrawn, due to the court ruling.
Yet the banks' main case, and the technicality they won on, means that bank charges are part of the 'price' of an account. As it is the FSA's responsibility to regulate bank accounts, separate to the legal case, we believe the Supreme Court ruling may mean it can now investigate the fairness of charges directly and without need for the court. We know this is being looked at in Whitehall and at the FSA.
Martin Lewis, MoneySavingExpert.com creator, says: "Seconds out, round two. The host of new legal routes to challenge the fairness should give renewed hope to the millions of people waiting to get the money back that was unfairly taken from their accounts.
"What is crucial is the Office of Fair Trading takes up the cudgel. Can Gill from Glasgow, Pete from Peterborough or Nikkie from Notting Hill really be expected to match up to the big bucks top end barristers in the courts? This is complex law and we need the big institutions of state to champion financial justice.
"The OFT has already provisionally said it thinks charges aren't fair, and having had legal advice, we believe there are substantial legal avenues available for it to challenge fairness. Therefore, it seems quite simple; the OFT cannot give up.
"Yet if the OFT refuses to live up to its name and fight for fairness, we and other consumer groups are looking to publish a fresh round of template letters, and possibly organising a group action.
"Yet that could need reclaimers to fund it as the cost could run into millions, and can those already struggling due to these nasty charges really be expected to pay? The last thing we need is some of societies' poorest priced out of justice."
What the politicians say
Martin Lewis has spoken to the three main political parties and asked that they support continued action from the OFT.
Nick Clegg MP, leader of the Liberal Democrats, says: "Banks must not be allowed off the hook after the astonishing court judgment last month - the fight must go on. The excessive fees imposed by banks are simply wrong and must be changed. There is a simple principle of fairness at stake that bank charges must be transparent and proportionate.
"While the Liberal Democrats will keep up the fight in Parliament, I hope the OFT will act upon MoneySavingExpert's legal advice to continue pressing the case through the courts."
Mark Hoban MP, Shadow Financial Secretary to the Treasury, says: "November's Supreme Court judgment was a blow for consumers. The OFT has said it will explore the use of other powers to investigate and we support that. We have already called for a competition review of banks - it must include consumer banking charges.
"November's judgment has perpetuated the uncertainty over bank charges which is damaging for the entire industry."
Sarah McCarthy-Fry MP, Exchequer Secretary to the Treasury, says: "The Supreme Court decision is obviously very disappointing for the many consumers who feel they haven't been getting a fair deal on bank charges.
"We are focusing on ensuring we have a fairer system of charges for the future. We hope to do this through a voluntary agreement with the banks, but we don't rule out further options if a voluntary agreement doesn't deliver the changes we need - greater transparency and more proportionate charges.
"Through the Financial Services Bill we are also legislating to give consumers the ability to take a group action through the courts, where in the future there is misselling or abuse on the parts of banks."
MoneySavingExpert.com is also in dialogue with other consumer groups: the Consumer Action Group, Legal Beagles, and Penalty Charges.
Further reading/Key links
Fight back: Bank Charges