Bank charges: is this the end?
Updated on 25 November 2009
Seven banks and a building society were jubilant after winning their battle with customers over unauthorised overdraft charges.
The supreme court's decision means disappointment for millions of people seeking refunds after being charged what they consider to be exorbitant fees.
But there may be a sting in the tail for the banks because the supreme court said their charges could still be reviewed by the Office of Fair Trading, while the Treasury called for a fairer system.
The test case to decide the legal issues thrown up by the dispute was brought jointly by the OFT and Abbey, Barclays, Clydesdale, Halifax Bank of Scotland and Lloyds TSB, which are now part of the same group, HSBC, Royal Bank of Scotland Group and Nationwide Building Society.
If they had lost the appeal, it would have paved the way for further hearings to establish whether the charges are fair and, if not, what a fair charge would be.
It was estimated that up to 8m people may have paid unauthorised overdraft charges since July 2001, but have not yet submitted a claim to get their money back.
Customers who go into unauthorised overdraft or breach their agreed limit can be charged as much as £35 or more for a single bounced payment.
Campaigners claim the actual cost to the banks could be as little as £2.50.
If the banks had lost, it would have cost them £2.6bn a year in lost revenue and could have led to their having to make refunds of up to £1bn.
Peter Vicary-Smith, chief executive of consumer group Which?, said: "This is a bitter blow for the millions of people who have been patiently waiting to get their bank charges back.
"Not only does it give banks licence to charge what they like for unauthorised overdrafts, but it could have ramifications for other areas of personal finance. The banks now have no excuse for introducing other fee charges."
Welcoming the ruling, the British Bankers' Association said: "The supreme court has today confirmed that the banks' unarranged overdraft charges are an important part of current account services which the banks provide to their customers and that the amount of those charges is not assessable for fairness.
"We recognise this issue has been of real concern to a large number of our customers and we are pleased that this decision now brings clarity for all parties.
"The banks will work with the regulators to ensure that the outstanding customer complaints are brought to a swift conclusion.
"We will also continue to work together with the OFT in connection with its on-going market study."
For the government, Sarah McCarthy Fry, exchequer secretary to the treasury, said: "Consumers, who have been waiting a number of years, will be extremely disappointed with this outcome.
"It's clear that in the past, banks were not thinking enough about their customers.
"That needs to change for the future.
"While the decision on past charges has not gone in favour of consumers, we are determined to ensure the system is made fairer in the future.
"The Government will work with the OFT and Financial Services Authority to reach a new framework for fairer bank charges going forward."
