Banks win appeal over charges
Updated on 25 November 2009
The banks win their appeal against being ordered by the Office of Fair Trading to reimburse up to a million people who claim they have suffered unfair overdraft charges. Jenny Wivell reports.
The supreme court ruled that the charges for unauthorised overdrafts were part of the conditions of the accounts and therefore outside the scope of OFT regulation.
But today's shock ruling is unlikely to be the end of the matter. The supreme court ruled in favour of the seven major banks and a building society, which had challenged high court and court of appeal decisions that the charges come under "unfair contract" rules and are therefore subject to regulation by the Office of Fair Trading.
Today's result was awaited by tens of thousands of customers whose refund claims have been frozen while the test case went through the courts.
Industry sources have warned it could lead to consumers having to pay a monthly fee for their current account or a charge on every transaction.
The latest round of the legal process comes after seven major banks and a building society challenged high court and court of appeal decisions that the charges come under "unfair contract" rules and are therefore subject to regulation by the Office of Fair Trading.
At a hearing in June, the Law Lords, who then sat at the House of Lords, were told free banking was only made possible by the charges levied when customers went into unauthorised overdraft.
Angela Knight, chief executive of the British Bankers' Association spoke to Samira Ahmed.
It is estimated that up to eight million 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.
Some banks had already paid out more than £559m to customers who complained about "rip-off" overdraft charges.
Mark Gander, from the Consumer Action Group, which sparked the legal challenge, spoke to Samira Ahmed.
But many of the high street banks have already changed the structure of the fees they charge people who go into the red, with or without permission. .
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.
Eric Leenders, head of the retail team at the British Bankers' Association spoke to Samira Ahmed.
Sarah McCarthy-Fry, the exchequer secretary to the Treasury spoke to Samira Ahmed.
