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Supreme Court rules in favour of banks’ overdraft charges

On what will be remembered as a bad day for consumers, the UK’s Supreme Court has ruled that the Office of Fair Trading (OFT) cannot investigate unauthorised overdraft charges under the 1999 Unfair Terms in Consumer Contracts Regulations.

The charges are widely regarded as exorbitant and a High Court test case involving the OFT, seven High Street banks and one building society, has been running for over two years.

Last year, the High Court ruled that the OFT had the right to decide whether or not the charges were fair.

The banks challenged the ruling in the Appeal Court in March and although unsuccessful, were granted the right to appeal to the House of Lords, which has since had this aspect of its work taken over by the Supreme Court.

Alongside today’s ruling, the Supreme Court denied the OFT the right to appeal to the European Court of Justice.

However, Supreme Court President, Lord Phillips of Worth Matravers, did suggest that the watchdog could pursue fairer treatment for consumers under other regulations.

The OFT says is considering its position and it will make another announcement in December.

Meanwhile, over a million bank customers who have already lodged complaints over unauthorised overdraft charges remain in limbo because of a waiver allowing the banks to ignore complaints until the case is settled.

According to estimates, banks earn around £2.6 billion a year from unauthorised overdraft charges and could have been liable for refunds of up to £1 billion if today’s ruling had been in the OFT’s favour.

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