Over the past few months the banks have been reeling from one blow to another and, as bank losses take their toll, we hear of RBS posting the worst results in British corporate history – writing down £16.2 billion. I bet that there is more trouble ahead.
A day or so ago 1 million customers were a step closer to reclaiming their bank charges as the Court of Appeal rejected the banks’ case that these fees were part of the “core” agreement with customers rather than extra payments subject to consumer legislation. The banks could end up having to refund customers as much as £1 billion.
So what does the ruling mean? Well it’s a small step, but ultimately it means that the Court of Appeal believe that the charges levied against customers who exceed their overdraft limit can be assessed for fairness. I suspect it will have to go to the House of Lords before we get a definitive answer so it is more waiting for the banks’ customers because, since April 2007, the FSA has frozen hundreds of thousands of legal claims for refunds against the banks until we get that final, definitive, ruling on the legality of the charges under the 1999 Unfair Terms in Consumer Contracts Regulations (UTCCR).
Abbey, Barclays, Clydesdale, HBOS, HSBC, Lloyds TSB, RBS and Nationwide are looking to petition the law Lords and take their appeal to the House of Lords in a last desperate attempt to overturn the court of appeals ruling. I think that this has gone far enough and that banks continuing struggle is further damaging the relationships they are trying to rebuild with their customers. After all, nobody loves a banker now. This was echoed by chief executive of Which , Peter Vicary-Smith “The courts have made it clear the banks should now throw in the towel,” he said, “This whole saga has severely damaged the banks’ reputations. If they try to appeal in the face of such a clear decision, they will suffer further losses in the court of public opinion.”
So what’s next? Well if Lords decide that the banks can appeal they will have one month to decide if they want to go ahead ( I think they will, they care more about money than what people think of them. If that happens this will drag on for months as the case gets delayed. However, if the Lords reject the appeal then it will be down to the OFT to decide if the charges were “fair”. The OFT commented on the ruling by saying it was in line with its own “long-held interpretation” of the law and hoped to conclude its decisions on the fairness of these charges by the end of the year.
The future could well bring more heart ache for the banks and a windfall for those of us who can claim, but what are the long term effects? The banks are going to lose an income stream which equates to roughly £2.6 billion a year: I am one of the many that fear that this will bring about the end of free banking as they try to recoup their losses.
We will hear more in the next week or so but will the banks finally see an end to their turbulent times? and more importantly will they ever regain the trust for the general public? We can only hope that with a more transparent banking system and tighter regulation that the banks can put the much needed trust back in to the consumer.
