The end of free banking?
The banks have won round one in the court battle over bank charges. It is just three weeks since the banks agreed with the Office of Fair Trading that the courts should be allowed to decide if charging a customer £35 for going a penny overdrawn is lawful or not. But already it is becoming clear that the banks are breathing a sigh of relief.
First, under a deal with the Financial Services Authority, the banks can put all claims which have not been settled – and any new ones – into the pending tray until the courts decide the matter. Cases going through the courts will also be stayed. Even the Financial Ombudsman has said he will not decide any cases until the courts have ruled.
That deal will save the banks a fortune. Their recent accounts reveal they paid out £400 million in refunds of overdraft charges in the last six months alone. Now they can avoid paying out any more – perhaps for years. The case does not even begin in the High Court until January 14, 2008. And with one side funded by the taxpayer and the other by the banks, the judgement is bound to go to the Court of Appeal and then the House of Lords. Do not expect a final ruling this decade. Meanwhile the reclaim-your-bank-charges bandwagon has come to a juddering halt. And the banks can carry on charging what they like when customers slip into the red.
At the same time, a subtle campaign is developing to persuade us that if the banks lose it could mean the end of ‘free banking’. A spokeswoman for the British Bankers’ Association warned that the banks "could follow patterns abroad where banks charge for transactions such as ATM usage, direct debits and standing orders in addition to an annual fee." She stressed to Saga that did "not mean they would. They may or may not."
But the flames of fear have been fanned by moneysupermarket.com, the website which allows consumers to search for good deals on financial products. It has warned that if the banks did start charging it could cost each of us £300 a year – and more for those who do a lot of transactions. And of course when a sample of people was asked if they would want to pay such charges a majority said they would not.
And here is the essence of the problem. Most people manage their bank accounts well, do not go overdrawn without permission and do not pay penalty charges. So if they had to pay £300 a year for something that now seems free that would not be seen as a victory but a huge penalty on those who are doing nothing wrong.
But will the banks really impose these charges? We have all got so used to banking without being charged directly it would be a brave bank that was the first to do so. The best thing we can all do now is to make it very clear to our bank that if it starts charging we will move to one that doesn’t.
Go back to Paul Lewis front page