FSA investigates banks' retaliation against complaining customers

The Financial Services Authority (FSA) has been forced to step in after two financial service providers shut down accounts of customers who complained about potentially illicit lending fees.

Involving two of the largest account providers in Britain and Northern Ireland, the cases were passed to the FSA by the Financial Ombudsman Service (FOS).

The FSA, the chief regulatory body for finance, was brought in when concerns were raised that the bank and building society in question were retaliating against clients.

David Cresswell, FOS spokesman, said: "The specific issue is whether banks are behaving unfairly by closing the accounts of customers who have complained to them about overdraft charges."

He explained: "We have asked the FSA to get involved under the terms of Principal 6 of its remit, that companies must treat their customers fairly. The question of how complaints are handled goes right to the heart of that rule."

The investigation will be part of a larger FSA monitoring exercise into bank policy in the case of the many customers now lodging grievances about overdraft fees. Template complaints letters published on consumer websites have already been downloaded over 1.5 million times.

Banks have responded inconsistently up until now, with some banks automatically refunding charges after an initial complaint and others offering reimbursement after the issue has been escalated. Some banks repay the fees, on the proviso that this will be the end of any business with that client.

So far the solicitors and lenders have avoided any precedent by settling claims out of court.

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