Calls for protection against Unfair Bank Charges

Calls for protection against Unfair Bank Charges

The Forum of Private Business (FPB) has called on the Government to protect small businesses against excessive bank charges, following a high-profile Supreme Court ruling on consumer overdraft charges.

The Supreme Court ruling overturned the Office of Fair Trading’s (OFT) right to investigate overdraft charges on personal accounts, after a number of banks appealed against a previous decision.

Bank account holders are often forced to pay charges when a cheque bounces or if they go overdrawn without permission. However, the OFT disputed the banks’ right to do this, claiming charges were difficult to understand, too high, too frequent, and were being used to top up profits.

The FPB said it was surprised by the court’s decision, but that it would continue to campaign for excessive bank charges to be removed from small business accounts.

“Small businesses as well as consumers should gain more protection against unfair overdraft charges,”

said FPB spokesman, Phil McCabe.

“Banks are imposing significant charges on small businesses, often for going just a few pence over their overdraft. The charges are being imposed punitively when in many cases, money is coming in and they have made arrangements to inform their banks in advance. There is a severe lack of flexibility at a time when flexibility is needed most.”

Currently, personal account holders and businesses with less than ten employees can appeal against unfair overdraft charges and ask the Financial Ombudsman to intervene. However, for firms with more than ten employees, the charges are referred to as “service charges”, and require businesses to carry out a lengthy and costly legal process to dispute them.

McCabe added:

“The Financial Ombudsman can mediate in disputes with personal account holders, and micro businesses, and we think a good remedial measure would be to extend that to all small businesses. Small businesses are suffering as a direct result of unsustainable banking practices and we want more protection.

“Many firms don’t have the first clue where to take their complaints about what is classified as disproportionate charging,” he added.

The FPB will outline its concerns to the Small Business Finance Forum, an intermediary group set up by business secretary Lord Mandelson to liaise between small firms and banks, within the next few weeks.

A spokeswoman for HM Treasury would not comment on the FPB’s proposals.

The OFT is due to make an announcement in December revealing if it will challenge the Supreme Court ruling.

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