Banks to appeal unfair charges test case

UK banks are to appeal the High Court’s decision in the bank charges test case.

In a test case involving the Office of Fair Trading (OFT) and a group of seven banks and a building society last month, the High Court ruled the OFT could decide if the charges are fair.

The judge - Mr Justice Andrew Smith - has now allowed the banks to appeal, in a case management conference today.

Peter Vicary-Smith, Which? chief executive, said: "This is a real kick in the teeth for consumers as it just drags out the whole process. It’ll be at least another year before people start to get their money back, during which time the banks will hit us with up to £3.5 billion in overdraft charges.

"The banks should do the right thing now, throw in the towel and start reimbursing the customers they’ve been overcharging all this time."

Which? estimates banks are charging £111 every second in unauthorised overdraft charges.

Mr Justice Smith has also said he will look at historic terms and conditions laid down by banks to judge whether they are fair.

If he decides older terms can be judged by the OFT to be fair or not – banks could be hit for further claims for compensation.

It is feared the banks could now make up for the loss of income from current account penalty fees, by introducing charges for day-to-day banking.

Eventually, overdrafts may not be available on current accounts, unless customers sign up to premium packages that banks are already introducing, linking overdrafts with a number of insurance products.

This follows the example of the upping of credit card repayment interest rates when charges were trimmed by the OFT.

The next step – if the banks' appeal fails – is for the OFT to continue its investigation into whether charges are fair.

If it deems the charges are too high, it can force the banks – through the courts if necessary – to lower the charges.

During the case, the FSA has provided banks a waiver so they do not have to deal with complaints about unauthorised overdraft charges – either through the courts or the free Financial Ombudsman Service (FOS).

However, bank customers who have paid fines are advised to still lodge their complaints.

Daniel Barnes