Consumer Panel welcomes test case on overdraft charges; but banks need to take action now to address FSA criticisms of complaints handling

27 July

The Financial Services Consumer Panel welcomes the announcement that the Office of Fair Trading and a number of banks have agreed to bring a test case in the High Court on unauthorised overdraft charges.

John Howard, Chairman of the Panel, said:

"It is terrible that the issue of bank charges has been allowed to rumble on for so long, with thousands of consumers having to threaten action to have their cases settled. The test case will provide certainty and consistency for consumers in the way firms are dealing with complaints. We understand and support the decision to allow banks to suspend dealing with claims until the test case has been decided, but will be pressing the FSA to revoke the waiver if the test case becomes protracted and consumers are exposed to undue risk."

The Consumer Panel also welcomed today's publication by the FSA of a letter to Chief Executives of firms providing current account services, in which it sets out how banks need to improve their handling of complaints about unauthorised overdraft charges.

John Howard, Chairman of the Panel said:
"We are glad that the FSA has carried out this work on complaints handling, over which it already has direct control. We believe the deficiencies this work has exposed reinforce our view that the FSA should regulate all aspects of retail banking, including imposing the requirement to treat customers fairly. The current self regulation of retail banking through the Banking Code does not seem to be coming up to the mark.

The wide range of criticisms in this letter to Chief Executives, especially in relation to closing the accounts of customers who complain, suggests that some banks are having difficulty making judgements about the fair treatment of customers."

Notes to editors

1. The FSA established the independent Financial Services Consumer Panel in December 1998 to advise its Board on the interests and concerns of consumers and to report on the FSA’s performance in meeting its objectives. The Consumer Panel has statutory status.
   

2. The emphasis of the Panel’s work is on activities that are regulated by the FSA, although it may also look at the impact on consumers of activities outside but related to the FSA’s remit. More information about the Panel's work is available on this website.
   

3. The Consumer Panel brings together a wide range of relevant experience. This includes financial services regulation, working with vulnerable consumers, consumer protection, consumer education, front-line money advice, legal expertise, competition policy, public policy analysis, market research and media.
   

4. There are currently twelve members of the Panel as listed below.

   John Howard (Chairman)
   Adam Phillips (Vice Chairman)
   Kay Blair
   Michael Chapman
   Stephen Crampton
   Caroline Gardner

   Jenny Hamilton
   Tony Hetherington
   Nick Lord
   David Metz
   Lindsey Rogerson
   Carol Stewart