Bank charges

Banks and building societies seem to charge whatever they want regardless of base rates set by the Bank of England. And we seem to be encountering unfair bank charges more than ever these days.

You miss your payment by a day or momentarily venture into the wrong side of your agreed overdraft limit and you are slapped with a heavy penalty which will invariably incur interest and end up costing you much more than you had bargained for.

Thank goodness then that the City watchdog, the Financial Services Authority (FSA), has announced that it will be closely monitoring how changes made to unauthorised overdraft charges by banks will affect customers.

After the Office of Fair Trading (OFT) found that credit card providers were behaving illegally by charging more than £12 for late payments by consumers, the heat has now been turned to the high charges placed on consumers for unauthorised overdrafts and bounced payments.

However, the FSA said that banks would be allowed to continue to delay responding to consumers' complaints until after their test case against the OFT.

Consumers who had incurred hundreds of pounds in charges on their accounts began protesting to their banks to repay the fees - most decided to pay up or chose not to defend themselves in court and were ordered to make the repayments to disgruntled consumers.

In July, the banks and the OFT both agreed to take a test case to the high court to determine whether or not the fees were legal and fair, and the FSA agreed to waive its usual rules on complaints handling.

The waiver allows banks to put off dealing with any claims for refunds of their charges until the result of the case is known - the high court is expected to hear the case in the New Year.

The outcome of this could be quite a landmark. If the OFT are victorious in the high court case, then millions of consumers around the country can wave farewell to unfair bank charges.

One of the conditions of the FSA's waiver is that banks are not allowed to make materially adverse changes to the level of their unauthorised overdraft charges, but the regulator said today that a number of firms had changed their terms and conditions relating to the charges.

Although some banks have argued that their changes are in their consumers' interests, the FSA said it would be closely monitoring how the changes would work in practice and whether they amounted to a breach of the waiver and are disadvantageous to consumers.

Clive Briault, FSA managing director of retail markets, said: "The test case between the OFT and the firms is a crucial step in establishing certainty about the legality and fairness of unauthorised overdraft charges.

"When this certainty has been established, complaints about unauthorised overdraft charges can be dealt with consistently and fairly."

Let's hope that the judges rule in favour of the OFT, which doesn't have an axe to grind and truly has the best interests of the nation's consumers at heart.