OFT announce investigation into bank charges

gt94sss2

In response to the OFT's statement of principles on the calculation of credit card default charges, credit card issuers have agreed to reduce their default charges - the majority by almost half.

In April, the OFT stated that credit card default charges had been generally set at a significantly higher level than was considered fair and set a £12 threshold for OFT intervention unless there were exceptional business factors. Many card issuers have stated that they do not agree with the OFT's view of the law and that they believe that their default charges were fair but, in view of the reduction in charges across the market, the OFT is satisfied that no further intervention is warranted in this area at this time and that this change has brought about substantial benefits for consumers.

The April statement also indicated that the OFT considers that the broad principles in relation to default charges are likely to be relevant to other standard agreements with consumers such as those for bank current accounts. The responses received from the banking industry have generally challenged this belief but the OFT remains of the view that the broad principles do read across to the retail banking area and has decided to undertake further work on the application of these principles to bank current accounts. In the course of this work the OFT will liaise closely with the Financial Services Authority (FSA) and hold discussions with the British Bankers' Association (BBA) to ensure that distinctive features of retail banking and the circumstances in which default charges are applied are identified and taken into account. The OFT has also been made aware of concerns about the personal current account market in Northern Ireland by the General Consumer Council (GCC) and will consider its report as part of this exercise. This fact-finding exercise is expected to take between three to six months, at which stage the OFT will consider whether a further detailed investigation of the fairness of individual bank default charges is needed.

John Fingleton, Chief Executive of the OFT said:

'The reduction of default charges on credit cards is great news for consumers. By taking an innovative approach to this issue, the OFT has brought about a significant change in one area of the financial services sector. We are now extending that work to inform ourselves about account default charges. We welcome the willingness of organisations such as the BBA to work with us in looking at the application of the principles we set out in the April to this area.'

Source: OFT Press Release

I will leave it to others to comments but this help* settle the arguments about whether banks should refund bank charges to customers and if so, should it be all the charge or just a % (i.e. above £xx/charge)

Regards
Sunil
*obviously anything the OFT says is not definitative - that can only be done by the courts

oldwiring

What would be the situation if an actual investigation were put in being? Would the banks and finance cos be able to respond to aclaim, that it was on file and a decision would be forthcoming once the investigation had been concluded and that the decision would be in accordance with the recommendations?