One million in bank charge logjam

Almost one million people have had their claims for the return of their bank overdraft charges frozen since July 2007.

Figures obtained under the Freedom of Information Act (FoI) from the Financial Services Authority (FSA) reveal the scale of the backlog.

Nearly 973,000 complaints have been put on hold by the UK's banks, with nearly 27,000 stayed in the UK courts.

The figures were obtained by the consumer campaign group Legal Beagles.

"I am surprised - it's huge," said Nick Spooner of Legal Beagles.

"It's far more than I thought," he added.

Long process

When the volume of claims from disgruntled bank customers reached a crescendo in the summer of 2007, the authorities and the banking industry sought a joint solution.

The main banks and the Office of Fair Trading (OFT) agreed to start a High Court test case to resolve if bank charges were fair and legal.

In the meantime, the FSA allowed the banks and the Financial Ombudsman Service (FOS) to put any fresh claims on hold, with the judiciary also allowing county court judges to stay any new cases that were lodged in the courts by claimants.

The legal process has, however, taken far longer than originally anticipated.

After failing to overturn the OFT's jurisdiction in the matter at both High Court and Appeal Court level, the banks are now planning to appeal to the House of Lords later this year.

They wish to challenge the current High Court and Appeal Court rulings that the OFT, under the 1999 Unfair Terms in Consumer Contracts regulations, can decide if their overdraft fees are fair or not.

"Most of the claimants would have been aware at the time they complained that their complaints would have been automatically put on hold," said Mr Spooner.

"Surely the figure must represent the highest number of consumer complaints about a single issue?"

Next year?

The second stage of the litigation, which will decide the actual fairness or otherwise of the banks' charges, is unlikely to start before 2010.

"Surely the figure must represent the highest number of consumer complaints about a single issue?"
Nick Spooner, Legal Beagles

The OFT recently said its own investigation into that point might not be to be finished until the end of this year.

That means some bank charge claimants might eventually have to wait for three years before being able to pursue their currently frozen claims.

"You could fill Wembley stadium ten times over with the people waiting on bank charges claims," said Which? lawyer Chris Warner.

"It's a huge issue and has to be settled as quickly as possible."

The banks have never admitted how many claims they settled before new cases were put on hold in the summer of 2007.

But estimates by the BBC, based on information from the banks' annual reports for 2007, suggested that in the course of that year, the banks paid out £784m to about 378,000 customers.

Many of these claims involved customers going to their local county courts, with the banks then typically settling and paying up, rather than running the risk of a local judge deciding that their charges were illegal.

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