High Court to rule on bank charges case

by Gill Montia

Story link: High Court to rule on bank charges case

Memories of the High Court case that will settle the matter of the charges made by High Street banks for unathorised overdrafts have become somewhat blurred in recent months, as the global banking sector has teetered from crisis to crisis.

However, the outcome of the case is eagerly awaited by the millions of account holders who are waiting to see if they will be reimbursed for the penalty charges.

The Office of Fair Trading, which brought the case against eight UK banks under the Unfair Terms in Consumer Contracts Regulations, has announced that a judgement will be passed down earlier than expected, on Thursday of this week.

Last summer, banks were granted a waiver allowing them to withhold action on complaints until the outcome of the case is known.

In many instances the waiver has been applied to cases due to be heard in County Courts, although it was not designed to do this.

The banks’ main defence has been that the charges do not fall under the Unfair Terms regulations because they are a service provided with a current account.

The OFT has argued that the charges, of up to £39 for a bounced cheque, standing order or direct debit, are not linked to a service and do not reflect the actual cost incurred by the banks in dealing with such misdemeanours.

According to the OFT, UK banks earn up to £3.5 billion a year in unauthorised overdraft fees and if the OFT wins the case, banks could be required to cut their fees and return millions of pounds to customers.

Whatever the content of this week’s ruling, the losing side is likely to appeal, meaning the final outcome of the case will be delayed until 2009.