Arrangement Fees – A new underhand move by UK banks

As the consumer war against banks that have been charging extortionate penalty fees rages on, it seems that a number of banks in the UK are trying yet another trick in order to try and get off the hook.

For a number of months consumers in the UK have been contacting their banks and reclaiming fees going back six years in some cases. These fees were applied to customers' accounts by way of a penalty for exceeding their overdraft limits, even if by a tiny amount, but the charges were deemed unfair and unlawful by financial regulators when it came to light that the charges being applied were way higher than the cost being incurred by the bank.

It is though that they administration cost to the bank when a consumer goes over the overdraft limit is minimal – basically the cost of a computer generated letter. However, in some cases consumers were being charged up to £40 a go by banks simply for going a couple of pounds over their limit. Now banks are having to repay millions as consumers take advantage of the ruling by financial regulators and demand repayment of these unfair fees.

The banks have already tried a number of tactics in order to avoid paying back these charges to consumers. These tactics range from delaying the processing of claims or failing to send out relevant information to consumers through to closing down or threatening to close down the accounts of consumers that go ahead and make a claim. And now it seems that a new tactic is underway.

A number of banks, including Barclays and HSBC – have been changing the wording on current accounts without publicising the move, which means that future claims could become invalid.

The banks have changed the wording so that the charges are now called arrangement fees, which some experts say could invalidate future claims.

One legal expert stated: 'This is an attempt by the banks to evade the current movement for refunds. But just changing the name of the charge isn't going to get them off the hook, if what they are doing is the same.'

Tom Smith
14th March 2007