Gordon Brown warns bailed-out banks to play fair with overdraft fees

Published on Wednesday 25 November 2009 22:04

BANKS bailed out by the taxpayer must not increase overdraft fees despite a landmark ruling that the charges are legal, the Prime Minister insisted yesterday.

Gordon Brown told MPs that bank charges will not spiral despite the controversial Supreme Court ruling.

The decision gives banks the power to charge what they please for overdrafts without interference from consumer watchdog the Office of Fair Trading.

Millions of bank customers hoping to be refunded up to 20 billion in "unfair" overdraft charges could now receive nothing.

Royal Bank of Scotland chief executive Stephen Hester welcomed the ruling and said customers should realise that banking services cost money.

"We should understand that there is not a free lunch here. If banks have certain costs of business, if we don't get paid those costs in one way, we have to find them another way."

Mr Brown insisted, however, that banks bailed out by the taxpayer during last year's financial crisis must not exploit the ruling to increase charges.

Q&A: What next for overdraft charges?

The Prime Minister said Northern Rock, the Lloyds Banking Group, which owns Bank of Scotland, and RBS had reviewed their overdraft charges to be "fairer to customers".

Last night, a government minister also insisted that banks would have to change their charging regime despite the ruling. Treasury secretary Sarah McCarthy Fry said: "Consumers, who have been waiting a number of years, will be extremely disappointed with this outcome.

"It's clear that, in the past, banks were not thinking enough about their customers. That needs to change for the future.

"While the decision on past charges has not gone in favour of consumers, we are determined to ensure the system is made fairer in the future."

Lawyer Mike Dailly, from Govan Law Centre in Glasgow, said: "We may have lost the battle but the war goes on."

&#149 One of those affected by overdraft charges is jobless Bank of Scotland customer Lewis Ottery, 18, who has a 100 overdraft on his current account. He was stunned when the bank wrote to him two months ago to tell him he had gone over the limit without approval and charged him 28. When he couldn't pay, more charges followed.

Lewis, from Nairn, phoned the bank and got three charges cancelled but others have been added. His most recent letter said he now owed 135 in unpaid charges and could face court action to retrieve the cash.

He said: "It's ridiculous they keep adding more charges when they know I can't afford to pay."