A judge has threatened to strike out the defence put forward by banks in bank charges cases unless they can prove they will contest them in court.

District Judge Toombs believes some banks are abusing the legal process.

Although banks begin legal action, so far all cases have been settled ahead of a formal hearing.

Consumer groups which advise people on reclaiming charges have welcomed the judge's intervention.

In orders seen by BBC Radio 4's Money Box programme, the Lincolnshire district judge has given one bank, Lloyds TSB, 14 days to detail all the claims it has pursued in the past and whether and when it has settled each of them.

We believe that the order was legally flawed. Had we not settled we would have applied to set the order aside.

Lloyds TSB confirmed it chose to settle the cases under discussion but in a statement questioned the judge's right to threaten to strike out its defence.

"The judge made his order without a hearing so we were not given a chance to make representations. We believe that the order was legally flawed.

"We judge cases on an individual basis and in this case made a decision to settle. Had we not settled we would have applied to set the order aside."

Thousands of customers have successfully used the county courts to reclaim their bank charges. But as settlements are typically reached at the eleventh hour, no legal precedent on the issue has yet been set.

The people who are claiming are being led a song and dance through the procedural obstacles of small claims litigation.
Marc Gander, the Consumer Action Group

The orders were welcomed by Marc Gander from the Consumer Action Group website which campaigns on behalf of customers reclaiming their charges. He said the judge's action was significant.

"The people who are claiming are being led a song and dance through the procedural obstacles of small claims litigation. Finally this judge is putting a stop to it."

Peter Cable from Newark in Nottinghamshire has received one of at least six orders believed to have been made by the same judge, and hopes others will follow suit.

"I think it would be a wake-up call for the banks. It would certainly make them realise they have to treat this issue seriously and it's not just an annoying instance which they hope will go away."

Judge Toombs' actions have been noted by other district judges, as they decide how best to deal with the thousands of bank charge cases reaching their courts.

Speaking on behalf of county court judges in London, Judge Paul Collins said: "Nobody can approve of the situation that exists at the moment which leaves so many people in the dark as to what the banks' real intentions are going to be.

"It would be very desirable to have a test case to see whether the arguments being put forward by the banks are sustainable or not."

Myvesta UK

Banks are using underhand tactics to deter customers from challenging bank charges and fees incurred for exceeding overdraft limits, consumer group Which? has claimed.

A report by the consumer campaign group says some banks have threatened to close accounts or charged too much for statements needed for claims.

It comes as the Office of Fair Trading is preparing to report on bank fees.

The British Bankers' Association called the research "unfounded" and said bank account fees were "perfectly legal".

Doug Taylor, the personal finance campaigner for Which?, said: "In an attempt to avoid paying consumers what they are due, we have found that banks are employing increasingly underhand methods to avoid their responsibility to treat their customers fairly and refund the charges."

He said Which? believes banks have been over-charging customers who exceed their overdraft limit "for years" and "charging billions" in the process.

He told BBC Radio's Five Live that Which?'s research had found delays in answering letters and some banks closing accounts "if consumers challenge these charges".

'Put off'

"Many consumers, we know, have successfully challenged their charges, but we're a bit concerned that maybe some people are being put off by the length of time and the difficulties that they're facing," he said.

The consumer campaign group said it heard evidence of several cases of banks charging between £3 and £5 per page for duplicate statements to start their claims. The law states they can charge a maximum of £10 in total.

However, Eric Leenders from the British Bankers' Association told BBC Breakfast that bank account fees were "perfectly justifiable and perfectly legal".

"We would say that if people feel that they, in turn, have been charged unfairly, they should always speak to the bank manager first.

"The information that's provided by Which? is unfounded and, in fact, could potentially be quite misleading."

Last year the top six High Street banks in the UK made an estimated £4.5bn from penalty charges, which include charges incurred for unauthorized overdrafts and bounced cheques.

Myvesta UK

The UK can expect to see a whopping 30,000 people declare themselves insolvent in the first three month quarter of 2007. Of this number it is predicted that 10,000 of these people will declare insolvency due to debts acquired over the 2006 festive season.

2006 brought on many fiscal changes for the UK. Unemployment figures were high, utility bills rose, interest rates sky-rocketed and 110,000 claimed cases of insolvency occurred resulting in £1,268 billion of debt. All of these ongoing changes have resulted in adding an average £1 million to the nation’s debt every four minutes. That’s £340 million every day!

It may come as a shock to most people that 27% of 2006’s debt will pile up before 25% of 2007 is over. One can only assume that the rest of the year’s figures will continue to rise, making 2007 an even higher year for insolvency.

Myvesta UK