This article is from the source 'bbc' and was first published or seen on . It will not be checked again for changes.

You can find the current article at its original source at http://news.bbc.co.uk/go/rss/-/1/hi/business/6918140.stm

The article has changed 9 times. There is an RSS feed of changes available.

Version 4 Version 5
Banks agree to charges test case Banks agree to charges test case
(about 2 hours later)
A number of UK lenders, including HSBC, Lloyds TSB, Royal Bank of Scotland and Nationwide, have agreed to go to court in a test case about overdraft charges.A number of UK lenders, including HSBC, Lloyds TSB, Royal Bank of Scotland and Nationwide, have agreed to go to court in a test case about overdraft charges.
Banks have had a long-running battle with consumers over whether fees levied for unauthorised borrowing are legal.Banks have had a long-running battle with consumers over whether fees levied for unauthorised borrowing are legal.
The Office of Fair Trading will sue the banks claiming the charges are unfair.The Office of Fair Trading will sue the banks claiming the charges are unfair.
Tens of thousands of cases have already been settled out of court, costing the banks millions of pounds in refunded charges, and clogging up local courts. Tens of thousands of cases have already been settled out of court, costing the banks millions of pounds and drawing criticism they were dodging the issue.
Market watchdog the Financial Services Authority (FSA) will allow banks to suspend dealing with any claims filed against them until the test case is decided. Market watchdog the Financial Services Authority (FSA) will allow banks to suspend dealing with any claims for repayment of overdraft charges filed against them until the test case has been decided.
However, the banks will still need to make a note of any claims lodged, and will have to honour offers to settle claims that were made before the test case and waiver were announced. However, the banks will still need to make a note of any claims lodged, and will have to honour offers to settle that were made before the test case and FSA waiver were announced.
Angela Knight, chief executive of the British Bankers' Association (BBA) said that legal clarity was needed to end uncertainty for banks and consumers alike.
Unfairness rulesUnfairness rules
The Office for Fair Trading (OFT) said that the lenders approached the UK's financial watchdogs in order to sort out the problem and agreed to the test cases in England and Wales, Scotland and Northern Ireland. Angela Knight, chief executive of the British Bankers' Association (BBA) said that legal clarity was needed to end uncertainty for banks and consumers alike.
She added that the banks had not softened their view that the charges were legal and fair, and said that the lenders could only "start looking at the issues underneath" once they had a ruling.
The Office for Fair Trading (OFT) said that the lenders had approached the UK's financial watchdogs in order to sort out the problem and agreed to the test cases in England and Wales, Scotland and Northern Ireland.
LENDERS IN TEST CASE BarclaysHSBCRoyal Bank of ScotlandClydesdale BankHBOSAbbey NationalLloyds TSBNationwideLENDERS IN TEST CASE BarclaysHSBCRoyal Bank of ScotlandClydesdale BankHBOSAbbey NationalLloyds TSBNationwide
The OFT said that on Friday it would commence proceedings in England's High Court for "a declaration on the application of the law in respect of unauthorised overdraft charges".The OFT said that on Friday it would commence proceedings in England's High Court for "a declaration on the application of the law in respect of unauthorised overdraft charges".
"The banks do not accept that the unfairness rules of the Unfair Terms in Consumer Contract Regulations apply. The OFT believes that they do and is seeking to establish this legal principle clearly in the court," it added. At the heart of the court case will be whether or not the overdraft charges are a fair reflection of the costs incurred by banks.
"The OFT considers that a quick determination of this point of principle will assist in securing a clear and orderly resolution of the fairness of these charges." Under current rules, the banks cannot make punitive charges when customers exceed their overdraft limit without prior permission or write cheques when they have insufficient funds in their accounts.
Customers have been arguing that the fees levied far exceed the costs incurred by the banks.
"The OFT considers that a quick determination of this point of principle will assist in securing a clear and orderly resolution of the fairness of these charges," it said.
Out of court?Out of court?
To date, the banks have been reluctant to contest such cases, usually settling out-of-court.To date, the banks have been reluctant to contest such cases, usually settling out-of-court.
So far no bank has outlined the case for its charges in open court.
If a bank were to do so and lose its argument that the charges were fair, it could lead to many more bank customers getting refunds, analysts said.If a bank were to do so and lose its argument that the charges were fair, it could lead to many more bank customers getting refunds, analysts said.
However, Ms Knight of the BBA said that banks had been unwilling to take an individual to court as the case would be different from person to person and would not offer a definitive answer on the legal issues being questioned. She added that the banks had not softened their view that the charges were legal and fair, and could only "start looking at the issues underneath" once they had a ruling. The BBA's Ms Knight said that the banks had been unwilling to take an individual to court as the case would be different from person to person and would not offer a definitive answer on the legal issues being questioned.
She declined to say how much the banks stood to lose should the test case go against them, but said that it could affect the way they do business in the UK.
There has been speculation that lenders could end their free consumer bank accounts should the ruling go against them.
"We are defenders of free banking," Ms Knight said, adding that while it was too early to say what the outcome of the court case would be "we cannot say it will have no impact".