U.K. High Court's Overdrafting Ruling: U.S. Banks Monitoring for Trans-Atlantic Impact

Abstract: In a first ruling on the legality and limits for courtesy overdraft fees, Britain's High Court has determined that the U.K. Office of Fair Trading may challenge the 3.5 billion pounds in overdraft charges levied by banks under the Unfair Terms in Consumer Contracts Regulation 1999.

While consumer protection laws in the U.S. are different from those of the U.K., the first salvo of legislative oversight of U.S. courtesy overdraft triggering-events, opt-out availability and check posting to maximize overdraft events has been fired in the form of H.R. 946:Consumre Overdraft Protection Fair Practices Act.

If the High Court continues to rule against the High Street Banks, the impact in the U.S. will be an emboldened ground swell of populist and legislative enthusiasm for reigning in the overdrafts generating $17.5 billion for U.S. banks.This is a Mercator Advisory Group Note and is available through a membership services relationship. It is also available for one-off purchase.

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