Dark day for consumers as OFT drops challenge to unfair charges

THE OFFICE OF FAIR TRADING (OFT) has announced that it is dropping its legal challenge to the fairness of overdraft charges. GLC's Mike Dailly, Principal Solicitor said:

“This is truly a dark day for millions of consumers across the UK. The news that the OFT has dropped it legal challenge to unfair bank charges is quite possibly the worst Christmas gift any statutory regulator could give to hard working families struggling to make ends meet and hoping to get a refund of excessive overdraft charges at some stage".

"Before the OFT raised its unsuccesful test case individual consumers were able to obtain £1 billion pounds in refunds. Since the OFT stepped in, all refunds have been on hold for two and half years. As the OFT has dumped its challenge, the banks will move to strike out 50,000 court cases across the UK; the Financial Ombudsman may move to reject 15,000 complaints, while the banks will move to reject the one million or so customer complaints it has placed on hold over unfair charges. Quite literally it's a consumer disaster".

"We believe the OFT was legally and morally obliged to continue with its challenge. Legally because the Supreme Court advised the OFT in its judgment that the door to challenging the fairness of charges remained open under regulation 5 of the UTCCR (Unfair Terms in Consumer Contract Regulations 1999), and separately because new grounds of challenge under the Consumer Credit Act became available from 2007 onwards. Morally, because consumers were doing very well in obtaining their own refunds before the OFT stepped in, and it's wrong to leave them high and dry now".

"Once you assume the role of the UK's leading consumer champion, you can't have a faint heart. You can't desert the public when the going gets tough, you've got to see things through to the end. If consumers are to be thrown overboard without any life jacket by the OFT, then at least the UK Government's current Financial Services Bill contains provisions for 'class' or 'multi-party' actions. It won't be easy, but it may be possible for consumers to use these new provisions to take on the banks directly".

"In Scotland, there is nothing to stop the Scottish Government fast tracking the introduction of a system for multi-party actions, as recommended by the Scottish Civil Courts Review. At present Scotland does not even have the 'Group Litigation Order' rules available in England since 2000, and unless consumers can come together to pull their resources it will be exceptionally difficult to obtain consumer justice against the banks".

"In Scotland, Govan Law Centre has already started to amend claims to take on board the Supreme Court's decision, and new Consumer Credit Act remedies, and is currently awaiting court dates. The campaign goes on, and we'll be issuing some information on the new legal arguments as soon as possible".

Listen to Mike's discussion on this subject on Radio 4's Today Programme.