High Court rules in favour of OFT in bank charges case

by Gill Montia

Story link: High Court rules in favour of OFT in bank charges case

An initial High Court ruling on the penalty charges made by Britain’s High Street banks has found in favour of the Office of Fair Trading (OFT), which brought the case against eight banks, on the grounds that charges being made for unauthorised overdrafts were illegal under consumer law.

Mr Justice Andrew Smith has ruled that the OFT can assess the terms and conditions that allow the banks to charge the fees under the Unfair Terms in Consumer Contracts Regulations.

The OFT’s examination of the terms and conditions is likely to conclude that the charges are unfair because a typical £39 fee for a bounced cheque or direct debit is well above the cost incurred by the bank in dealing with such an event.

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

So far, thousands of disgruntled account holders have successfully reclaimed their money.

Last year, the High Court granted a waiver allowing banks to postpone decisions on new cases until the outcome of the case is known.

In addition it is estimated that around £700 million in charges is waiting to be reclaimed from cases that have been put on hold by the County Courts.

Whatever the final ruling of the High Court judge, the losing side is expected to appeal, delaying the matter into 2009.