Bank fees under scrutiny

The Financial Ombudsman Service has issued a ruling which implies that banks which close the accounts of individuals who have questioned charges to them by their banks have acted improperly. The FOS, which is an independent arbitration service, has told Alliance & Leicester that it has to pay a customer whose account it closed without notice after the customer took the bank to court over what he felt were illegal charges by the bank. The ruling requires the bank to compensate the customer but does not say that it must reopen the account.

The current ruling is just one of many cases in which customers have questioned overdraft fees and fees for checks written on insufficient funds following an Office of Fair Trading decision last year that called similar fees by credit card issuers excessive. The OFT is now looking at a number of cases involving banking fees and is widely expected to rule later in the year that charges for bouncing checks that exceed £12 are too high.

Some banks now charge up to £40 when a customer bounces a check or exceeds his overdraft protection. When customers have questioned these fees, banks have sometimes agreed to refund the fee but then close the accounts of the customers who have taken legal action on the matter. Alliance & Leicester has said that while it does not prevent customers from making complaints, but will close an account if it “becomes clear” that it cannot satisfy the customer. It claims that it has closed less than 500 accounts in such circumstances.

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