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Banks have won a two-yearÂ court battle, dealing a major blow to hundreds of thousands of customers seeking to claim back billions of pounds of what they say are unfair overdraft charges.
The new Supreme Court found that the Office of Fair Trading cannot use customer protection rules to investigate whether the fees were levied unfairly.
The landmark ruling in favour of seven banks and one building society overturns two previous rulings that said the OFT had the power to investigate the unauthorised overdraft fees because the charges fell under the scope of consumer contract law.
The Supreme Court, however, said the charges form part of the fees for current account services and could not be assessed for fairness under the Unfair Terms in Consumer Contracts Regulations.
Britain’s largest banks and the Office of Fair Trading remain locked in a case management hearing in court over the thorny issue of current account default charges, but the judge has already indicated that the banks will be given the green light to appeal the ruling against them. The appeal — on at least part of Mr Justice Andrew Smith’s ruling, which relates to “fairness” and the rights of customers to sue banks — is a hammer-blow to scores of consumers whose claims for compensation have been put on hold while the matter trundles through the courts.
The issue could now go to the Appeal Court and the House of Lords before the full case goes to court — and that could take two years or more. In the meantime, the Financial Services Authority has put on hold customer complaints and court cases relating to the charges, putting the brakes on any compensation payments. And, as the legal process rumbles on, the banks continue to rake in vast sums of money by hitting consumers who go over their overdraft limit or write a cheque that bounces with exorbitant charges. Analysts have estimated that that banks make up to 3.5 billion pounds in overdraft charges every year: by delaying the case, they could amass some 7 billion pounds.