Bank Charges

We acknowledge receipt of your e-mail dated 4 September (our ref FF 23463).

We will reply in due course.

If you have any queries please contact the Bank's Public Information and Enquiries Group on 020 7601 4878.

Public Information and Enquiries Group
Bank of England

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Dear Mr Mannion

May I first explain that the Freedom of Information Act 2000 ('FoI Act') provides right of access (subject to the provisions of the Act) to recorded information held by public bodies as defined by the Act. I can confirm that the Bank is defined as a public body for the purposes of the FoI Act and that we will respond to specific requests for recorded information that we hold. Your email is asking a general question about charges issued by banks and the law and not asking for access to information, therefore I have provided a response to your question below.

A bank's authority to debit bank charges from a customer's account may be contained in an express term in the bank's terms and conditions governing the account. However, even if an account does not have written terms and conditions, or those terms and conditions are silent on the authority to levy charges, it is well established that the custom of usage of banks permits a bank to levy charges for their services.

Interest and charges levied by banks on consumer credit are subject to the terms of the Consumer Credit Act. As regards charges for accounts and other services, currently there are no regulations in place but there are standards of good practice which are laid out in voluntary Banking Codes, sponsored by the British Bankers' Association and the Building Societies Association. There are two Banking Codes: one for personal customers, and another for business customers with a turnover of under £1 million. Most major UK banks are subscribers to these codes, and the Banking Code Standards Board monitors and enforces subscribers' compliance. The provisions in the Banking Codes regarding charges mainly relate to the provision of information regarding charges and adequate notification of intended charges. For more information on the Banking Codes, see the Banking Code Standards Board website at www.bankingcode.org.uk The Bank of England has no power or responsibility to intervene in banks' decisions regarding charges.

It has been announced that, with effect from November 2009, the voluntary Banking Codes will be replaced by new rules set by the banking regulator, the Financial Services Authority (FSA), regarding the conduct of business for retail banking. Unlike the voluntary Banking Codes, all authorised banks, building societies and credit unions will be required to comply with these new FSA rules. These changes will come into effect at the same time as the Payment Services Regulations (PSRs). The PSRs will implement a new EU directive which will harmonise the rules and standards to most payment transactions across the European Union. The FSA will be responsible for monitoring and enforcing compliance with the PSRs in the UK.

Yours sincerely

Stuart Allen
Deputy Secretary of the Bank

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Dear Mr Mannion,

A bank's authority to debit bank charges from a customer's account arises from the contractual relationship between the bank and the customer. The express terms of the contract (for example, as set out in the bank's account terms and conditions) may contain an express clause authorising the bank to deduct its charges. If there is no written contract, or the written contract is silent on the question of bank charges, leading banking law texts state that the custom and usage of bankers permits a bank to levy charges. As the Financial Services Authority is about to commence regulating banking conduct of business rules with effect from November 2009, they may be able to provide further assistance. Their contact details can be found on their website at www.fsa.gov.uk

Yours sincerely

Stuart Allen
Deputy Secretary of the Bank

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