Tuesday 22nd May 2007
A legal battle over charges for an unauthorised current account overdraft has ended in victory for Lloyds TSB.
Lloyds TSB customer Kevin Berwick had brought the case to court in an attempt to win back some £2,000 of current account charges after entering an unauthorised overdraft.
In a judgment at Birmingham county court, District Judge Cooke stated that to his knowledge, this was the first case to be ruled on in court.
He noted that all previous claims made by customers had been settled out of court, usually for the full amount of fees charged and without admission of liability by the bank.
In the ruling, District Judge Cooke emphasised the difference between current account charges and those applied to credit cards.
He suggested that as individuals may have little control over the exact sum of money in their accounts - due to variations in the clearing time for cheques - they should not be considered in breach of contract if insufficient funds are present to honour a payment.
In contrast, he argued that fees charged for exceeding a credit limit, which may be fixed and measurable, could be seen as penalties and thus may be reclaimed.
But as the charges incurred by Mr Berwick were not penalties and were ruled to be costs for the financial services providers actions, such as returning a bounced cheque, the judge stated that there was no legal requirement for them to be refunded.
Commenting on the verdict, the Consumer Action Group noted that as the decision was made in a county court, "the judgment is not binding on any other court or on any other judge in the country".
Meanwhile, a similar case brought by lawyer Tom Brennan against NatWest is due to be heard this week.
In a statement on his personal website, Mr Brennan argues that by placing disproportionate charges on his current account, NatWest has interfered unlawfully with his economic interests.
As such, if he were to win, Mr Brennan could stand to recoup not only the fees charged, but additional compensation in the form of "exemplary damages".
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