Bank charges ruling a blow for consumer
MILLIONS of customers hoping to reclaim more than £1bn in overdraft charges suffered a blow yesterday following a landmark ruling in favour of the banks.
The Supreme Court sided with eight major lenders who had challenged decisions made by the lower courts that the unauthorised bank charges come under “unfair contract” rules.
The ruling means the Office of Fair Trading (OFT) does not have the powers it thought it had to scrutinise the fairness of bank charges.
The lenders had faced having to make refunds of more than £1.1bn if they had lost the case. A large chunk of the £2.6bn of revenue they receive from the charges each year would also have disappeared.
Consumer groups were angry with the decision. They say it allows banks to continue to charge customers up to £35 each time they are overdrawn without permission – even if the amount is less than a pound. Campaigners believe the cost to the banks is as little as £2.50.
The OFT said it would consider the judgment before making a decision on whether or not to continue with its parallel investigation into unauthorised overdraft charging terms.
But for those customers that do not go into red without permission, the ruling was better news. Banks had warned the case could have meant the end of free banking.
The Treasury said it was focusing on a “fairer system for the future”.