Bank charges for unauthorised overdrafts are subject to regulation by the Office of Fair Trading (OFT) under "unfair contract" rules, the court of appeal ruled today.
The court's rejection of an appeal by current account providers could result in consumers reclaiming billions of pounds in unauthorised overdraft charges and could lead to an end of free banking in the UK.
The ruling follows a test case last year between the OFT and eight current account providers concerning fees for unauthorised borrowing and bounced cheques, which concluded they were covered by the Unfair Terms in Consumer Contracts Regulation of 1999.
This means the OFT could rule that the fees are unlawful and that banks must return overpaid charges to customers.
The judgment could cost banks £2.6bn a year in lost revenue and lead to them having to make refunds of up to £1bn. However, consumers could still have to wait some time before money is returned.
A spokesman for the OFT said: "The judgment means we can go forward and we are now looking to go back to the banks to say whether we think the charges are fair."
But he added that the process would be complex because it involved different banks' terms and conditions over a long period of time. He said the OFT has already started examining the small print on current accounts.
"We expect to reach a final decision on fairness later this year."
Banks could apply to the law lords for permission to appeal to the House of Lords.
More details soon ...
- Bank charges
- Banks and building societies
- Current accounts
- Borrowing & debt
- Banking
- Consumer affairs
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