Banks pay out over half a billion in overdraft fee compensation

by Richard Kilner

Story link: Banks pay out over half a billion in overdraft fee compensation

Yesterday, from annual reports of a number of banks, it was revealed that £559m has been given in refunds from high street banks to their customers in recompense for unauthorised overdraft charges.

At present the English High Court is hearing a test case to ascertain whether such charges are fair.

The charges are deeply unpopular with consumers, however the £559m is not the full total as both the Nationwide Building Society and Abbey have declined to publish their figures for the charges.

RBS, HSBC and Barclays all paid out between £110 and £120m, whereas HBOS paid out the most, with £122m in compensation.

The case proceeding through the High Court could see a judgement made as to the proper amount to charge for breaches of arranged credit limits, or going into an unauthorised overdraft.

Seven banks and the Office of Fair Trading, as well as Nationwide, brought the case, following the claiming of millions of pounds from a large number of customers.

HSBC has confirmed that, should the judgement go the worst possible way for the banks, it stands to lose £303m in payouts.

Using the HSBC figure as a guideline, it is forecast that the combined loss to the banks could top £1bn.

However, banks make up to £3.5bn per annum from the charges.