Ahead of the expected decision of the newly-formed Supreme Court to allow unfair bank charges to be investigated, the Forum of Private Business (FPB) is calling for protection for all small businesses as well as consumers.
The Supreme Court will today (25 November) make its most important decision yet in the case of Office of Fair Trading (OFT) v Abbey National PLC and others, in what is expected to be the final legal stage in the long-running bank charges saga.
If the banks’ appeal is dismissed the OFT will be given the green light to investigate the fairness of bank charges and publish a final conclusion in early 2010 – likely to be critical of the current level of bank charges imposed on consumers.
However, the FPB is concerned that the conclusion of the legal process could make it harder for business customers to recover disproportionate bank charges.
"The FPB’s research shows it is not just consumers who are continually left angered and confused by banking practices," said Matt Goodman, the FPB’s Policy Representative. "That is despite the OFT emphasising that lenders must conduct their business in ‘plain, intelligible language’.
"Even where finance has been available, many of our members have been subjected to increased bank charges and other changes to their lending agreements with little warning, explanation or justification. Many of them don’t have the first clue where to take their complaints and what is classified as disproportionate charging."
Mr Goodman urged the Government to do more to help small business owners resolve their complaints by extending the vital role of the Financial Ombudsmen to hear complaints from all small businesses with up to 50 employees, rather than just micro-businesses (those with fewer than 10 employees and a turnover of less than £1.8 million) and private individuals.
"Two or three additional employees shouldn’t stand in the way of a small businesses getting a fair deal," added Mr Goodman. "The Government should work with the Financial Ombudsmen and FSA to put in place clear structured guidance on business account charges which protect all small business owners."
The basis of the OFT’s action is that the bank charges should be subject to the test of fairness outlined in The Unfair Terms in Consumer Contracts Regulations 1999, which apply only to consumers.
While the FPB welcomes the OFT’s attempt to provide legal clarity, because the courts have already decided the charges do not constitute a penalty under common law, business customers appear likely to be faced with the unenviable prospect of being the only group without a clear route for reclaiming disproportionate bank charges.
Without access to significant financial resources, many small business owners are affected by disproportionate bank charges in a similar way to consumers.
The additional cost to businesses is exacerbated by the rise in account fees and the increased cost of lending. Research carried out by the FPB shows business customers are facing increasing charges for their business accounts.
In a recent survey of members, the FPB found that 42% of respondents have experienced an increase in overall banking fees, with just 2% seeing an overall drop.