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Tuesday, August 28, 2007

OFT Has Betrayed Consumers

The OFT has betrayed consumers. That is the verdict of several of my colleagues and clients after the Office of Fair Trading (OFT) decided to launch a test case against the main high street banks over excessive bank charges.

Towards the end of 2006 consumers in the UK learned that their banks could possibly be charging them illegally for things like exceeding overdraft limits or bouncing cheques. As these were construed as costs to the bank, and not fees, the assumption was that these things were costing the bank about the same amount of money as the banks were then charging their customers.

So was it costing the bank £30 to send a letter to a customer telling them they had exceeded their overdraft limit by one penny? Did it really cost £25 to send an automated note to a customer saying that a cheque had bounced? No. Clearly it did not.

Tens of thousands of people began asking their banks for their money back, and the people won. The banks, to everyone’s surprise, did not contest this in the courts. The banks did not bring a test case because they knew they would lose.

Everything was going the consumers’ way. By Spring 2007 thousands of people were taking the banks to court every week, and winning.

Then, on July 27th, in a move that has upset many an applecart, the Office of Fair Trading decided to end this. The OFT has betrayed consumers by taking on the banks over their excessive charging without giving due consideration to cases already in progress. The OFT gave no warning about what it was about to do, but just weighed in and started proceedings, initiating a test case. This will now put on hold all pending claims. Opinion differs as to the length of time these will be put on hold, but some people say that consumers will have to wait over three years to get their money back. The OFT has betrayed consumers, the very people they are meant to be protecting.

In some cases the claims run into thousands. Does the OFT think it is serving the public well by depriving individuals of thousands of pounds of money which should not have been taken from them in the first place? The OFT has betrayed consumers by its action; it has betrayed the very people it is charged with helping.

Caveats are now issued by the OFT (who may now understand their terrible blunder), to the effect that due consideration should be given to cases of genuine hardship. The reality is that, in cases of genuine hardship, the burden is on the claimant to prove that hardship. Specifically this is done with a form N244 (obtainable from the H.M. Courts Service website here).

The problem is that this costs £35 just to send it to the court. Does it not occur to the OFT that people who tend to have racked up so many bank charges in the first place may be in situations where they are least able to pay such fees? This whole thing is about reclaiming illegal fees, not paying more fees. The OFT has betrayed consumers not once, but twice.

In reflecting how the OFT has betrayed consumers it is interesting to note that this case only relates to reclaiming bank charges. Charges can still be reclaimed from credit card companies. See the Credit Card Balance Transfers site for details of saving even more on credit cards.

File under: OFT Has Betrayed Consumers. Watch this space for developments.

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