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Finance Charges

After thousands of refund claims being submitted to banks were put on hold late last year pending a high court review, the case brought by the OFT finally starts today. The prospect of mass refunds of loans charges, overdraft charges and other types of banking fees which may be deemed unfair could lead to millions being refunded by the banks.

The basis of the case is that banks are charging fees for services which far exceed the actual cost and suggestions are that banks are netting around £10 million every day through these fees.

Last year, before the stop on claims was made, banks were typically refunding most claims without cases having to go to court. The banks were fearful of a test case ruling against them.

The initial case being brought by the OFT is not aimed at deciding whether the charges are unfair, but whether the charges come under the ruling of 1999 regulations covering Unfair Terms in Consumer Contracts.

If it is agreed that this is the case, then the next step will be to judge the "fairness" of these charges when applied to current accounts, credit cards, loans and other financial products provided by banks.

If the ruling means that the current charges are ultimately deemed to be unfair then the banks may be forced to trace back through records of up to six years and make refunds.

The whole procees however is likely to take some months to resolve as the Financial Ombudsman Service and the FSA are likely to become involved if decisions on compensation are required.

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