September 3, 2008 | posted by Pam Atherton in Banking, Savings |

The Office of Fair Trading (OFT) has written to the main UK retail banks stating that their overdraft charges are ‘probably unfair,’ as part of  its ongoing investigation into default charges.

In April , the High Court ruled that the OFT had the right to scrutinise the fairness of banks’ current account charges, following claims by hundreds of thousands of disgruntled bank customers that they had been charged excessive amounts for going into the red.

Many of these claims ended up in the small claims courts, triggering chaos because each case had to be judged on its own merits as county court judgements do not set a precedent.

The OFT says it has written to all the banks whose charges it has been investigating in order to start a dialogue and to ascertain which issues may need to be resolved in court.

Pending the outcome of the OFT’s legal challenge, all pending bank charge complaints have been put on hold and customers can expect years of legal wrangling because four more High Court decisions are yet to come.

These include a High Court  ruling, which is expected soon, as to whether the OFT can also investigate the fairness of overdraft charges levied by banks in the past and whether these were unfair penalties under common law and under the 1999 Unfair Terms in Consumer Contracts regulations.

The banks, meanwhile, are to appeal in October against the OFT’s initial High Court victory in April and in late 2008 or earl 2009, a High Court hearing is expected to consider whether bank overdraft charges are unfair.

An earlier investigation by the OFT into bank accounts generally found that overdraft charges generated an income for the banks of £2.6bn a year.

In the meantime, if you are fed up with your bank, switching accounts has never been easier. For details on the deadlines which banks must adhere to when you ask to switch banks,  see page 11 of the banking code:
http://www.bankingcode.org.uk/pdfdocs/PERSONAL_CODE_2008.PDF

To compare accounts, visit Defaqto’s unique Compare Tool:
http://www.defaqto.com/consumer/current-accounts/compare-current-accounts.aspx

Kauphting Edge’s online account is currently paying 6.55 per cent AER:
http://www.kaupthingedge.co.uk/