Hike in bank fees warning

Jan 14 2008 Jez Davison and Sarah Judd, Evening Gazette

BUSINESSES in the region could face potentially crippling fees if banks lose a High Court case beginning today.

The case has been brought by the Office of Fair Trading (OFT), which claims overdraft charges imposed by seven mainstream retail banks and the Nationwide building society are unfair.

If they lose the case, banks say they would need to recoup lost income - thought to be about £10m per day - by levying new charges on businesses.

The news has been met with shock by North-East firms, who believe they are already forking out too much in bank fees.

Lisa Cairnes, who runs her own photography business, Middlesbrough-based Picture Memories, said: “Businesses are already charged for paying money in or taking it out once their free banking period of 12-18 months runs out.

“If more charges were passed on to businesses it would make the situation worse and especially put a real strain on small businesses.

“It would affect me quite a lot because I get a lot of cheques for my work and you are already charged when you pay them into the bank.

“If this happens I will have to look around to see if any other banks were willing to offer free business banking, how long for and what rate it would go up to after that.”

According to a survey of 1,022 people conducted by consumers’ association Which?, 79% said they would consider switching banks if monthly or annual charges are brought in for using bank accounts, while 73% thought current account charges would be unfair.

Thousands of customers are estimated to have won more than half a billion pounds in refunds from their banks in 2007 after accusing them of imposing excessive overdraft fees that were unfair and illegal.

The British Bankers’ Association, however, said pricing structures were “correct and legal” and that the hearing is an important opportunity to bring clarity to the legal position.

Martin Blackwell of Blackwell’s butchers based in Norton, said: “I can’t honestly think that banks can charge small businesses any more because they will be up in arms.

“Small businesses are already charged for absolutely everything by the bank to the point where some will even charge you for exchanging money to get change to use in the shop and charge you for using the night safe every time you put money in.”

The outcome of the court case may decide how much banks can charge millions of account holders who go overdrawn without permission.

These fees can amount to more than £30 for going into the red or having a cheque bounced.

The OFT will argue that the overdraft charges, which the banks have been restyling in their literature as “fees for a service”, come under the scope of the 1999 Unfair Terms in Consumer Contracts Regulations.

The regulator says this gives it the authority to decide itself if the charges or fees are unfair, and also gives it the power to do something about it.

It will also argue that the banks’ terms and conditions are not written in sufficiently plain English, a factor which would also give the OFT jurisdiction over them.

In November, the OFT accused banks in the past of charging customers more for unauthorised overdrafts than it cost to provide them.

For their part, the banks argue consumer legislation does not apply because the charges they impose are a fee for a service and not a penalty charge.