Bank Refunds in 2007

In 2007 there was a refund from the banks totalling 784 million pounds to many of the consumers. The UK banks had to repay such a high amount in refunds to consumers as they sued the banks for overdraft charges. A study completed by the BBC has shown that the banks have actually avoided giving back at least 1.37 billion pounds in refunds. The legal action has asked for this money to be refunded, but in new claims in 2008 with the newest of many court cases the refunds have been suspended. The reason for this is the new case. Those who have won in previous cases could lose unless the court rules against the banks. The calculations of the BBC come from the annual figures reported by the five major banks in the UK. The issue has stemmed primarily from the overdraft fees bank consumers were being charged.

A year ago the UK banks were inundated with hundreds of thousands of disputed by disgruntled consumers. The consumers believed that they were being unfairly penalized by such high overdraft fees; therefore they lodged complaints in the country courts and the Financial Ombudsman Services. These complaints not only believed the charges were unfair, but they also stated that they were illegal as well.

The result was that the banks had to refund money to those who were a part of the lawsuit, but when the Office of Fair Trading decided to investigate on the higher level the payments were put on hold. The agreement was created in July in the High Court when a test case was run regarding the governing of the fees.

The first result of this new case led by the Office of Fair Trading is expected to be released in the next few months. The banks’ annual reports for the last season are now in, which is what the courts were waiting for. All of the evidence needed to be in place before they could actually get a decision. The reports are going to determine just what the payout was in the last year that the banks had to make. The five biggest banks in the UK had to payout 549 million pounds in the last year.

The industry payout according to the news showed that the British Bankers’ Association held about 70% of the UK’s current accounts. So when looking at the other banks and building societies like Abbey and Nationwide paying out similar sums in relation to size it is likely that 784 million pounds was released to consumers in the first half of 2007.

This total may increase after the release of the court decision in the next few months. The payouts have only been 35% of what they were ordered. Had the banks not been order to stop the refunds regarding the current case they would have paid out 1.37 billion pounds in the last year alone adding to the 784 million pounds that had already been released. The BBA doesn’t want to see the refunds become mandatory in this new year.

Financial News March 2008
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