OFT secures £179m of fee refunds for consumers from non-compliant lenders

banksCurrently, consumer credit is regulated by the Office of Fair Trading (OFT), but from 1 April, this responsibility will pass to the FCA. Most of us ease off when we’re about to leave a job, but not the OFT, who have negotiated a massive £149 million fee refund for consumers who were improperly charged by their bank.

Seventeen banks and building societies have agreed to repay over an estimated £149 million in interest and charges to around 497,000 customers, following OFT action.

The agreement comes after an investigation which found that banks and building societies were not adhering to the provisions of the Consumer Credit Act 1974. For example, Section 77A of the Consumer Credit Act 1974 obliges lenders to send periodic statements to customers, which must contain specific information and wording. Section 86B of the CCA sets out the requirement to send a notice to the debtor where they fall into arrears by more than two payments to alert them to that fact and the potential consequence of falling into arrears.

Crucially, where a creditor such as a bank does not send such these statements or notices, the bank is not entitled to enforce the agreement and that the debtor is not liable to pay interest or default sums during the period of the creditor’s non-compliance.

Last November the OFT wrote to 50 banks and building societies to suggest they checked their procedures to ensure they were fully compliant with the post-contract requirements of the Consumer Credit Act. Some lenders discovered they had not been compliant, and agreed to repay charges they were not entitled to charge, meaning the rest of the banks were forced to come to an agreement with the OFT.

David Fisher, Senior OFT Director for Consumer Credit said: “These issues were not deliberate misconduct, but the institutions concerned should have ensured they were complying with the law.  The OFT welcomes the proactive steps taken to return money to customers where it was incorrectly charged.”

Customers do not need to take any action at this time and should be contacted directly by their bank or building society if their agreement is affected. But if you haven’t been in arrears, you’re probably not going to get any charges refunded. Didn’t someone somewhere warn against rewarding poor (financial) behaviour…

What do you think?

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