UK banks face up to 8m claims

Banks and building societies across the UK could face up to 8m claims on bank charges, according to Which?

The prediction comes ahead of next Wednesday’s decision by the Supreme Court on whether bank charges are unfair.

If the Office of Fair Trading (OFT) wins the ruling, the UK’s leading high street banks could face a whole slew of complaints.

Of the 12m people who were hit with bank charges, 63 per cent have not asked for their money back.

Phil Jones, a personal finance campaigner for Which? said many account holders are simply unaware of their rights and often fail to notice the charges.

“The OFT did a market study last year that produced conclusive evidence that people don’t notice that they’ve been charged. It may be in the terms and conditions, but people aren’t aware of the complexity involved.”

The reputation of banks and building societies have also suffered at the hands of the recent financial crisis, prompting customers to speak out against what they believe are unfair charges.

Which? recently launched a campaign against certain banking practices, including high administrative costs on accounts such as £35 in fees for bank letters or for customers who had breached their overdraft limit.

Although Mr Jones expects the OFT to win, he said there is a possibility the banks could extend the case.

“This could ruin their reputation even more. But people need the money now,” he said. “With so much money at stake, the banks may well try to drag the process out even longer, so we’d warn people not to make any plans for their refunded cash just yet.”

Another 11 per cent have a claim on hold, while 42 per cent of claims for amounts of more than £500 are still waiting to be resolved. Forty-one said they would use the refunded money to pay off debt.

However, Kevin Mountford of Moneysupermarket.com said some of the penalties and charges are justified, since banks need to make a profit. But he also said there should also be an assessment of what constitutes an appropriate charge.

“It’s easy to criticize banks and in many ways, this was their own making. But there has also been a lack of transparency and consistency in product designing and pricing, as well as in credit card applications.”

Separately, Santander launched a fee-free bank account last week that will only be offered to customers who have a mortgage with the bank.