RBS plan consumer relief on repossessions and bank charges

The Royal Bank of Scotland have been in the news this week with the part-nationalised bank offering good news for both mortgage holders and current account holders.

With Britain’s banks currently fighting several separate battles, RBS, who also own NatWest, has taken high profile moves in two of them. Growing pressure from the government to take a more lenient stance on property repossessions and another potential bombshell is the current court battle for the right to charge customers for late payments, bounced direct debits and unauthorised overdrafts.

On the repossessions front, there is good news for those homeowners with debt problems and mortgages connected to RBS, with the bank claiming that it will wait for an account to be in arrears for at least six months before commencing repossession proceedings.

That pledge is twice as much as the three-month period that the Chancellor Alistair Darling called on banks to implement if a customer was having problems with payments and the decision is likely to put pressure on RBS’s rival HBOS (Halifax Bank of Scotland) – Britain’s biggest mortgage lender.

As the current financial crisis continues and the numbers of bad debts increase, banks have repeatedly been told that property repossession is to be a “last resort” measure although that hasn’t stopped experts predicting that repossessions will rise by 70% on last year before the year is out.

Just 24 hours after that announcement, it was revealed that RBS is also planning to “pro-actively” refund customers for any penalty charges that they may have been charged – should they lose High Court battle with the Office of Fair Trading (OFT).

The OFT is currently in a High Court battle with some of Britain’s major banks over what it considers to be illegal penalty charges being imposed by banks on customers who may already be struggling with debt or payment problems.

The charges, around £30 each at some banks, were typically applied to unauthorised overdrafts, late payments and bounced cheques or direct debits. The charges would also “accumulate” in an account so that, for example, if a charge for an unpaid cheque meant that the customer became overdrawn, a second charge for the overdraft would also be imposed – a practice with drew fierce criticism from consumer groups.

The OFT claims that these charges are disproportionate and unfair on consumers under the “1999 Unfair Terms in Consumer Contract Act” although the banks argue that the act is not a means of “price control”.

The latest revelation from RBS in no way affects the current court case although it does signal that the bank is preparing to refund customers – a move that will please consumer groups although RBS denies that it is predicting defeat in the case.