Judge set to allow banks to appeal

The major high street banks look set to be granted permission to appeal against a court ruling which could cost them billions of pounds in lost revenue and refunds to customers complaining they have been overcharged for exceeding their overdraft limits.

High Court commercial judge Mr Justice Andrew Smith indicated that he would give leave for a challenge to his ruling last month that penalty fees levied by the banks are subject to regulation by the Office of Fair Trading (OFT) under "unfair contract" rules.

The ruling had opened the way for an OFT investigation into whether the charges are actually unfair.

But with a lengthy appeal process set in motion, any OFT inquiry is unlikely to bear fruit for at least 18 months.

In the meantime, hundreds of thousands of bank customers hoping to recover what they regard as exorbitant overdraft charges must wait. The banks, through the Financial Services Authority, have been granted a "stay" on outstanding claims pending the end result of the court proceedings.

Banks make up to £3.5 billion a year from unauthorised overdraft charges, which can be as much as £35 for a single bounced payment.

The banks involved in the case are Abbey, Barclays, Clydesdale, Halifax Bank of Scotland, HSBC, Lloyds TSB, Royal Bank of Scotland Group and the Nationwide.

They contend that their overdraft charges and conditions are exempt from the provisions of the 1999 Unfair Terms in Consumer Contracts Regulations and that, in any event, their charges are not unfair because they represent legitimate fees for providing overdraft facilities.

At a case management hearing to decide future conduct of the proceedings, the judge said he was minded to give the banks leave to appeal.

The hearing continues.

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