Nearly a million people are still waiting for their claims to return their bank overdraft charges have been frozen since July 2007.

Figures obtained from the Financial Services Authority showed that around 973,000 complaints are still on hold, nearly 27,000 of these stayed in UK courts.

The information has been obtained through a consumer campaign group called Legal Beagles. Nick Spooner from the group said: “I am surprised – it’s huge. It’s far more than I thought.”

The number of claims being made reached a peak in the summer of 2007 at which point the authorities and the banking industry looked for a solution. They eventually decided to start a High Court test case to decide if bank charges were fair and legal.

For now, the FSA and the FOS have put new claims on hold the judiciary also allows county court judges to stay any newly lodged cases. But the whole system is taking longer than was initially planned.

‘It’s Far More than I Thought.’

Banks have so far failed to overturn the OFT’s jurisdiction over the matter after a High Court and Appeal Court and now intend to appeal to the House of Lords later this year.

Their case is based on challenging the present High Court and Appeal Court rulings that under the 1999 Unfair Terms in Consumer Contracts regulations, the OFT can decide if their overdraft fees are or aren’t fair.

The second stage of the proceedings is unlikely to begin before next year, and will decide the fairness of the banks’ charges.

The OFT itself is also conducting an investigation, the results of which are unlikely to be concluded by the end of the year, which means that some claimants might have to wait a total of up to three years before they can pursue their frozen claims.

Are Charges Legal?

According to Mr Spooner: “most of the claimants would have been aware at the time they complained that their complaints would have been automatically put on hold.

“Surely the figure must represent the highest number of consumer complaints about a single issue?”

The banks have not yet admitted how many claims it settled before it put cases on hold, but estimates based on information from the banks’ annual reports for 2007 suggest that during the course of the year banks paid out £784 million to around 378,000 customers.

Many of these claims were made by customers going to their local county court with banks settling and paying up instead of risking a judge deciding that the charges are illegal.

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If NatWest loses its continuing test case over bank charges, it has said it will refund overdraft fees to customers. These findings come as an internal bank document reveals preparations that banks are making if they lose their case.

The document that has been found says that overdraft fees may have to be refunded, the cost of which could run into millions of pounds overall. Though the bank, which has recently been taken over by the Royal Bank of Scotland, has said it was just drawing up a contingency plan to deal with one possible outcome of the test case.

The RBS NatWest is one of eight banks in total awaiting an Appeal Court judgement as to whether or not the Office of Fair Trading (OFT) can decide if their overdraft charges are unfair.

If the bank is to lose its case, the document reveals that customers can expect to be refunded, saying that a team from the bank are “preparing systems and processes to pro-actively refund charges to the group’s customer base.”

The bank document also says that: “all customer accounts that are due a refund will be calculated as accurately as possible…Any monies will be accurately accounted for and reconciled.”

It adds that the bank aims for “avoidance of group reputational damage and/or loss of funds.”

An RSB spokesperson has said that the document found simply reflects the fact it was obliged by the Financial Services Authority (FSA) to deal with its customers complaints “efficiently and swiftly” if it ended up losing its test case.

He said that “this work stream has absolutely no bearing on how we see the outcome of the test case.

“With an organisation of our size and our different brands, complying with these requirements demands careful contingency planning and this document merely confirms that RBS is taking its obligations in this respect seriously as it has done throughout the whole test case process.”

Campaign group Legal Beagle’s spokeswoman Sharon Coleman has said: “we would welcome a pro-active approach if they intend resolving the matter without further appeals.

“Consumers have become increasingly frustrated by the apparent lack of progress in the test case, especially those affected by financial difficulty.”

For the last three years, banks have been besieged by hundreds of thousands of angry customers demanding the return of high charges taken by banks whenever customers go overdrawn without permission.

Last year, eight banks and the OFT agrees to stage a test case in the High Court in an attempt to resolve the legal issues.

In the first round of High Court hearings, at the beginning of this year, the banks lost their case. Mr Justice Andrew Smith said in April that under the 1999 Unfair Terms in Consumer Contracts Regulations (UTCCR), the OFT had the power to decide if banks’ charges were fair.

An appeal to this decision was heard in October of this year, and judgement is expected in the New Year.

HSBC and Lloyds TSB have also revealed that they have a contingency plan in place should they lose that appeal, and there is little doubt that other banks will have measures in place also.

Among the conditions set by the FSA, includes that banks will have to make “preparations for dealing with relevant charges complaints when this direction ends and updating those preparations as the outcome of the test case becomes clear.”

Following recent Bank rate cuts to 3%, Premium Bond prizes are also set to drop.

The National Savings & Investments (NS&I) have said that total Premium bond prize payout will drop from £87.8 million to around £57 million by January next year. Along with this, the number of Premium Bond prizes will also drop from 1.54 to 1.1 million.

However, there will still be two £1 million jackpot prizes each month, the catch being that overall odds of winning a prize will rise from 24,000-to-1 to 36,000-to-1 per £1 bond. So, someone who has invested £30,000 in Premium Bonds, will win, on average, 10 prizes per year according to NS&I.

In recent months, NS&I have seen an increase in money being invested by the general public wishing to take advantage of its 100% state guarantee after recent worries about the solvency of High Street banks.

After the Bank of England made interest rate cuts from 5% to 4.5% in October, NS&I also cut their account rates. After the latest cuts, other variable NS&I savings rates are also being reduced along with the Premium Bond. This includes cuts in rates for their Individual Savings Accounts (ISA), income bonds, investment accounts, and savings accounts.

The interest rates in ISAs have been cut to 2.4% from 3.9%, and income bond rates have fallen by 1.3%.

In it’s Easy Access account however, savers are being offered a slightly higher interest rate than previously. The account focuses on people who have between £5,000 and £9,999, and the interest rates have increased from 1.15% to 1.45%.

Lloyds TSB has confirmed its takeover of HBOS to become the UK’s largest bank, in a deal it described as a “unique opportunity”. The deal values shares in Halifax Bank of Scotland at 232p each, and could lead to cost savings of £1bn a year.

Lloyds confirmed the speculation that jobs would be lost as a result of the merger, but played down the claims that 40,000 staff would face the chop.

The government featured heavily in the talks between the companies yesterday. Chancellor Alistair Darling said that the government was in support of the deal, as financial stability “must trump” competition fears.

The chancellor added that without the deal the outlook was “very bleak indeed”, and denied that the authorities had rushed through the deal.

“We were onto their [HBOS's] problem for several weeks. It didn’t just suddenly happen,” he told the BBC.

The buyout is more of a rescue package for HBOS as the company’s shares dropped dramatically in recent days, amid concerns for it future.

Lloyds said that the new bank would continue to use HBOS’s headquarters in Scotland and would focus on keeping jobs there.

Under the terms of the deal, HBOS shareholders will receive 0.83 Lloyds shares for every HBOS share.

“This will be a unique opportunity to accelerate and extend our strategy and create the UK’s leading financial services group,” said Lloyds chairman Sir Victor Blank.

Lloyds chief Eric Daniels was keen to point out that the takeover was not forced upon HBOS.

“There shouldn’t be any impression this is a shotgun marriage or a forced marriage, this is something that’s been looked at for a good long while,” he told reporters.

Lloyds added that their takeover was part of its strategy to build “the UK’s leading finance company”, adding that it also intends to increase the number of competitive mortgages on offer for first-time buyers.

The merger now means that Lloyds holds a third of the UK mortgage market, but competition watchdogs will not block the deal as it was supported by the government.

Following the takeover, Lloyds chief executive Eric Daniels will assume responsibility of the company, however the future of HBOS chief Andy Hornby is unclear.

Lloyds said that the group would continue to use The Mound – HBOS’s corporate headquarters – in Scotland, continue to hold annual general meetings in Scotland and carry on printing Bank of Scotland notes. Newspaper reports have claimed that as many as 40,000 jobs could be lost from the banks’ combined 145,000 workforce.

“In addition the management’s focus is to keep jobs in Scotland,” it added.

According to the deal agreement “significant cost savings can be made by combining the networks and back offices of Lloyds TSB and HBOS”.

Also included in the cost cutting package is the “elimination of branch duplication” in the retail arm – HBOS currently has 1,100 branches, and Lloyds TSB 1,900.

Head office posts, human resources and finance and legal departments are also likely to face “consolidation”.

HBOS chairman Dennis Stevenson believes that, “This is the right transaction for HBOS and its shareholders,

“Against the backdrop of the very high levels of volatility our industry is experiencing, the combined group will be one of the strongest players in the UK financial services sector.

“In addition, the combined group will have excellent brands and a very powerful franchise,” he added.

The Financial Services Authority (FSA) agreed the merger was a good thing saying it would “enhance stability within financial markets and improve confidence among customers and investors in the UK financial sector”.

Royal Bank of Scotland and Barclays London offices have been raided by the Office of Fair Trading, seizing documents and phone records, in the latest example of the competition watchdog’s hard-line approach to possible price-fixing.

The documents were taken as part of an investigation in to alleged anti-competitive behaviour over the pricing of loans to professional services firms, people involved in the probe said.

The probe was said to have been triggered by Barclays and comes amid high-profile investigations into price-fixing allegations involving supermarkets, consumer goods companies and tobacco groups. The OFT has confirmed they are in the early stages of the investigation and have a “narrow focus” into allegations of anti-competitive conduct in the financial sector.

RBS confirmed that its office at 280 Bishopgate had been raided and that it was fully co-operating with the authorities. Neither bank would comment, however, on the scale or scope of the material seized by the watchdog.

Barclays claim that members of its professional services team had been approached from outside the bank “in a manner which we regard as inappropriate”. The bank reported the incident on March 17, applying for leniency under rules that allow whistle-blowing companies to escape fines potentially amounting to as much of a tenth of global sales.

Barclays said: “The [OFT] investigation is operating within the confines of the professional services banking area and we believe that, if there is any issue, it starts and stops there.”

The OFT, in the past, used a more aggressive approach to tackling price-fixing, imposing heavier fines and using tough legal powers that allow it to target executives with the threat of up to five years in jail.

Only last year British Airways were fined a record £121.5m by the OFT for fixing the prices of passenger fuel surcharges. BA’s co-conspirator, Virgin Atlantic, applied for leniency and escaped a fine.

Banks are under increasing pressure from competition authorities in areas such as overdraft fees. The competition Commission is expected to publish a report later this week that will accuse leading banks of profiteering in the provision of loan insurance.

Since gaining independence, the Bank of England’s investors have been more sceptical of the way the bank tackles inflation.

The widening gap between the yields on index-linked government bonds and conventional gilts indicates bon-market investors are willing to pay much higher prices for inflation protection. As Britain enters its most inflationary period for more than a decade this suggests doubts about the credibility of the monetary framework.

Ex-chief economic adviser to the chancellor, and current children’s secretary, Ed Balls described inflation expectations in bond markets as the “most important” test of credibility and confidence in monetary policy.

Paul Dales of Capital Economics said the gap could be the “first sign that the markets are starting to lose faith in the ability of the UK’s policymakers to deliver a low and stable inflation environment”.

Alongside rising surveys of household inflation expectations and corporate pricing intentions, economists said there was a greater risk of higher inflation returning to normal British life.

“In every measure you look at, inflation expectations have already moved out of the range they have occupied in the last eight or nine years.” Malcolm Barr of JPMorgan said.

Sensing that a loss of confidence in the UK from abroad is under way after sterling’s continued decline, Danny Gabay of Fathom Consulting said: “The … markets believe the ‘macro policy miracle’ [since 1997] is more style than substance”.

Over a 20-year period, the government bond market now expects retail price inflation to average 3.76 percent, according to Bank of England figures, compared with 3.47 percent on the last trading day before Gordon Brown announced Bank independence. By comparison, the 20-year expectations two years ago were just 2.85 per cent.

The warning issued by Mervyn King, the Bank’s governor, that the “nice” decade (of non-inflationary constant expansion) was over has prompted other economists to offer their own acronyms. Few yet expect a recession, but Michael Saunders of Citigroup said times will be “vile” – “volatile inflation, less expansionary”.

Urging policy makers to fight higher inflation, Jean-Claude Trichet, president of the European Central Bank said, soaring oil and food prices had created “demanding times, challenging times”, and that the challenge was to ensure the pressures did not create lasting “second-round effects” by feeding through into wage deals.

Mistakes made at the time of the first “oil shock” in the 1970s had “enshrined the high level of inflation for a long period” and led to mass unemployment. Mr Trichet sounded the alarm on inflation even as he acknowledged that financial markets were still witnessing an “ongoing, very significant market correction”.

While there has been much coverage of missing data discs, hackers cracking systems and the like, the full extent of the underground world of fraud has only just been revealed in a deeply disturbing report which was published today. Symantec, the leading internet security firm, have announced the results of their recent review of the criminal underground network which the police are finding so hard to crack. It seems that while we battle to maintain the security of our systems and personal details, those which have been stolen are on sale for as little as £5 to anyone who is interested!

Even though the UK has been in the news of late over a number of high profile data handling errors, this is something which is taking a grip right around the world. Top of the league, again, was the US with over 31% of worldwide fraudulent activity within their boundaries, China and Germany accounted for 7% each and while the share of fraudulent activity in the UK was only 4% of the worldwide figures, the details are still alarming. So what exactly is going on?

There are a number of issues which need to be addressed to improve online security which include :-

Social Networking Sites

As bizarre as this may sound, Social Network Sites are the first port of call for many of those looking to commit ID fraud or worse, with many users of these sites posting very detailed and personal information on their profiles. Using the details available it is then possible to obtain copies of birth certificates, etc and assume the life of someone else. This can lead to loan applications, mortgages, credit cards and much more, with the victims only finding out when it is too late.

Spyware

Spyware is something which we have all come across but it is still the tool of choice for so many fraudsters, offering the chance to upload software to a victim’s computer, access their files and in many cases use their computer to carryout more fraudulent activity in the name of someone else. It is vital that we all ensure that our machines are safe, our firewalls are up to date and carryout regular virus scans to see if any new threats have sneaked in.

Password Protection

How many of us use the same user name and password for a vast array of our secure accounts and websites? How many of us have not changed our passwords at any time in the last 6 months? How many of us think that it will never happen to me? These are the easy pickings for the hackers and the fraudsters, and it has proved very very simple to hack into a whole array of bank accounts and cause havoc.

The fact that personal information on a possible fraud victim is changing hands for anything from £5 in these online cyber crime shops is frightening enough, but the fact that many of us are making it so easy for them is even more alarming. Let us all do our bit and try to stamp out what could become a massive crime wave if we are not careful.

While the UK government have been heavily criticised in the past with regards to lost data, it seems that this phenomenon is not just limited to the public sector. News that HSBC has lost a disc containing the details of 370,000 customers has not only caused acute embarrassment for the Bank but will ultimately result in a massive fine. So what happened?

It seems that HSBC, who normally use an electronic system to transfer data, were forced to use the Royal Mail in this instance. However, it appears that the disc was not sent by recorded delivery and a frantic search of the offices involved has not yet yielded the missing information. One of the more alarming elements of this serious slip in security is the fact that it seems to have taken HSBC just over 1 month to realise that the data disc had not arrived at its destination.

The FSA have already stepped into the fray and when you consider that Norwich Union were fined £1.2 millions and Nationwide £1 million for smaller security breaches, HSBC can certainly expect to be on the receiving end of a large fine. However while the fine will be substantial, in the overall picture it will be small feed to a bank which makes billions of pounds each year. More worrying will be the affect that this has on the Banks customers, many of whom have yet to be officially informed whether or not their data was included in the batch of 370,000. In some ways the UK banking consumer has a very short memory and this situation could just blow over, however recent comments in the press have woken the public to the threat of ID fraud and other similar situations and this may have an impact on client figures for HSBC.

Just as the debate about the government losing data seemed to be calming down, this will put the whole issue back on the front pages. HSBC have assured the markets that there have been no signs of fraud with regards to the account data held on the disc, but they have admitted that while the data was password protected, it was not encrypted. It does not take rocket science to crack a password and if the disc was to fall into the wrong hands we may see some worse headlines to come.

The point must be made that it is not just HSBC who have lost data about customers, but the problem with this particular incident is the amount of data on the disc, and the renewed public awareness of the possible risks. Unless the banking sector is able to stem the flow of similar news features we could slowly but surely see the public confidence in the current system fall. The regulators are doing all that they can, imposing fines and advising about the future, but ultimately it will take more stringent procedures and more care before reduced confidence can be rebuilt.

While we hope that this is the last of such incidents for some time, there is a fear that this may not be the case.

With high apprehensions of a global credit crunch, Bank of England has been approached by many high street banks for emergency loans to the tune of 23 billion pounds. This has resulted in the loss of 14 billion pounds by the shares in the banks pushing FTSE 100 index to close at its lowest level in the past two and half years. It is said that the urgent rescue of Bear Stearns, the fifth biggest bank of US competitor which was earlier broken up by JP Morgan for 240 million dollars is the main reason behind the falling of shares in the banks. Bear Stearns sell-off had raised fear among investors that the exposed US recession could also bring down any British bank and this has worsened the situation further.

The credit crunch has resulted in bitter relationship between banks that are very reluctant to lend each other and this has largely affected the mortgage industry. Banks heavily depend on cash transfer to finance the loans of their customers. With the drying up of these types of loans, mortgage deals have become impracticable in the recent years. The Bear Stearns bailout has further cautioned global banks and they are indisposed to lend each other fearing an imminent collapse. The US dollar crisis has also damaged the confidence in property industry showing signals of further price falls. The problems may turn from bad to worse and lenders would cut back their offer of loan size if the price reduction takes place.

Now the situation forces the public to depend on their savings or a deposit of 25% of property value would make them eligible for a first time mortgage. The non-availability of mortgages may make purchasing a house impractical and this may also force the sellers to accept lower prices or withdraw their property from the market during the last minute. People who want to buy even a one bedroom apartment for the first time will feel the crunch as getting their accommodation may go beyond their reach.

Many economists suggest that people should avoid unnecessary selling and if they have to sell then the property can be marked at 10% less than its original value to get more interest. First time buyers can restrain themselves from buying till the situation improves and they can indulge in hard negotiations and cheap bargains of property auctions. The home buyers who want to remortgage their property may not also find an affordable home loan deal due to the credit crunch. Though the housing market usually springs at the time of Easter weekend, today only fearless investors who are able to take calculated risks are investing their money in the market. Many feel that only when the banks stop worrying about the cost of bread and focus on the banking system the situation will improve.

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