Money
Managing your money
Banks told to come clean over charges
Two major high street banks have been told to reveal how much it truly costs them when customers go overdrawn, as the bank charges scandal reaches a new level, writes Holly Thomas.
Yorkshire Bank and Alliance & Leicester are the first banks to be ordered - by a Judge - to disclose how they calculate their penalty fees and what the actual cost of servicing a bounced payment is to them.
In Hull this week, of 44 bank charges claims due to be heard, 37 were settled out of court. In total more than £50,000 was paid out to claimants.
Judge Besford said the remaining cases should be heard in court and agreed to a disclosure order that would see the two banks explain how they reach fees in excess of £30 for going over an agreed overdraft or bouncing a single payment.
They are now left with a choice of either settling or disclosing details about how they calculate their charges.
Campaigners said they were delighted with the development since many claim the real cost to the banks is as little as £2.50 - but currently, exceeding an agreed overdraft limit by £1 can cost consumers around £30 in fees, and more if payments are bounced.
Under UK law, campaigners believe, banks can only impose fees that reflect their administrative costs in dealing with such misdemeanours.
As a result, many account holders have successfully had hundreds of pounds worth of penalties refunded by threatening their account providers with legal action.
Until recently banks have been settling out of court in order, they say, to avoid extra costs.
Where cases have gone as far as going to court, the judge has normally found in favour of the customer because the banks fail to turn up to defend themselves.
But they have won a handful of cases in recent months, giving them the confidence to refuse to back down.
Earlier this year a judge at Lancaster County Court ruled in favour of Lloyds TSB when it said Julian Rudd, a builder, had failed to state an adequate claim.
Lloyds also triumphed when Kevin Berwick's claim for £2,545 in fees and interest, brought before Birmingham County Court, was dismissed on the grounds that charges levied were a legitimate fee to service the account.
Campaigners are urging consumers to keep claiming their bank charges since this case does not set a precedent for future cases.
Last year the Office of Fair Trading (OFT) ruled that credit card companies could not charge more than £12 as a penalty fee.
It is now conducting an investigation into the charges for current accounts but its findings are not expected until the end of the year.
