Its pay back time for UK banks as the FSA closes in on excessive overdraft charges

It looks like the Office of Fair Trading can soon have their way and UK banks could be forced to pay back up to £20 billion that they have drawn  in excessive overdraft  rates and charges from the cash starved UK public.  Officials of the Office of Fair Trading (OFT) are expected to discover within the next week if they have been given a free hand to decide on the fairness of the charges levied by the banks, and reset a level of charges that will be both fair and retroactive

The landmark decision is to be laid down by the newly formed UK Supreme Court, now the e highest court in the land, replacing the House of Lords.

As is their nature, UK Banks  are making every effort not to release overdraft income, but if the new legislation goes through as expected, they will be legally obliged to the cumulative overdraft charges  that they imposed on  their 44.5million  current account customers, dated back to 2001.

Analysts have produced a broad estimate that the figure could be as high as £20 billion.  If the legislation is passed in favour of the Office of Fair Trading’s ballot, the situation could become increasingly complicated for the banks. Dependant on interest rates and fees charged, banks could be ordered to not only return excess charges to customers, but also interest on the sum that they were overcharged and retroactively.

Analysts monitoring the situation, are convinced that the only workable situation is some kind compromise deal, which will see the OFT setting a maximum fixed charge which the banks will refund without prejudice.  

The overdraft charge controversy began in 2006, before the first hints of a credit crunch were on their  way , and as early as 2007, more than half a million complaints were being investigated by the OFT. In 2007, some of the UK leading bank’s petitioned to the high courts to defend themselves against the OFT’s allegation. Until the matter could be settled, the Financial Services Authority (FSA) decided to put the affair on hold till the issue could be decided at the highest judicial level. More than two years later, that decision looks like arriving, with a number of bank official and more that a million UK bank account holders waiting with bated breath for the result.

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Tags: British Economy, Financial News, UK Banks