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Banks and consumers will today move a step closer to finding out whether billions of pounds of unauthorised overdraft fees and charges for bounced cheques will have to be repaid to customers, as the court of appeal announces its verdict in the case between the Office of Fair Trading (OFT) and current account providers.
Last January, the OFT and eight banks and building societies began a test case over the charges, which earn account providers an estimated £4.7bn a year, in a bid to decide if they were covered by the Unfair Terms in Consumer Contracts Regulation of 1999. If they were, the OFT would have been able to challenge them for being unlawfully high.
In April, a high court judge found in favour of the OFT, giving it the power to decide whether banks' and building societies' terms and conditions were fair. However, the banks said they would fight the case in the appeal courts and the House of Lords.
The case, in which banks argued their terms and conditions were exempt from the regulation, reached the court of appeal in October, and the result is expected this morning.
If it is upheld the judgment could cost banks £2.6bn a year in lost revenue and lead to them having to make refunds of up to £1bn.
Some commentators have warned that if the banks lose the case it is likely to mean the end of free banking in the UK, with consumers instead having to pay a monthly fee or a fee for each transaction they make.
Banks and building societies have already paid back about £784m in bank charges to consumers, but the Financial Services Authority put a stop to payouts in 2007 when it allowed account providers to sign a waiver which means they are only obliged to deal with cases that involve genuine hardship.
More than 2m letter templates aimed at helping people claim back charges have been downloaded from websites including guardian.co.uk/money, moneysavingexpert.com and Which?, and thousands of people are caught up in the legal system while the courts decide whether the OFT can challenge the charges.
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