Uk Rules that Overdraft Fees Can be Judged for Fairness

Overdraft fees have been a point of contention for consumer groups in the U.S. for some time now.  There have been claims that overdraft fees are not adequately disclosed at the time accounts are opened, and claims that debit transaction should be rejected at the point of purchase instead of charging an overdraft.  The UK has similar issues.  In a recent case, a UK judge decided that the Office of Fair Trading can rule on the fairness of overdraft charges and hold UK bank liable for unfair charges.  The OFT claims that many banks charge overdraft fees of up to 39 pounds when the cost to the bank for the overdraft is 2 pounds or less.  This could put UK banks on the hook for hundreds of millions of dollars in overdraft charges.  It could also open the door to high consequential damages claims -- [you charged me an improper overdraft which caused me to miss my rent payment which caused me to have to incur credit card debt to cover bills which caused me to incur thousands in interest.  Because of the $15 overcharge, you caused me $10,000 in damages].  UK banks generate 3.5 billion pounds from overdraft charges a year. 

Banking law in the UK is very different from banking law in the US so there is no cause for panic.  It is nonetheless an interesting issue and decision that could have some impact in the U.S.  See BBC article for more.