Banks lose test case over unauthorised overdraft charges paving way for £1bn payouts

[Legal Beagles]

Banks lose test case over unauthorised overdraft charges paving way for £1bn payouts

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[Paule]

Re: Banks lose test case over unauthorised overdraft charges paving way for £1bn payo

Bank charges for unauthorised overdrafts will be regulated by the Office of Fair Trading, paving the way for refunds of up to £1billion to disgruntled customers.
In a test case brought by the OFT and major high street banks, judges at the Court of Appeal upheld a High Court decision last April that the fees charged to personal current account customers are subject to regulation by the watchdog.
The banks argued that the charges were exempt from the 1999 Unfair Terms in Consumer Contracts Regulations because they were legitimate 'remuneration for goods and services supplied' to customers in the form of overdraft facilities.
They are now expected to apply to the Law Lords for permission to appeal to the House of Lords.
The appeal judges advised that, pending a decision from the Lords and the outcome of any OFT investigation into the fairness of the charges, thousands of county court claims launched by disgruntled customers seeking refunds should remain on hold.
Customers who go into unauthorised overdraft or breach their agreed limit can be charged as much as £35 for a single bounced payment, although campaigners claim the cost to the banks could be as little as £2.50.
If upheld, the court's judgment could cost banks £2.6billion a year in lost revenue and force them to pay out refunds.
Members of the industry have also warned that losing the case is likely to lead to the end of free banking in the UK, with consumers instead having to pay a monthly fee or a fee for every transaction they carry out.
The banks involved in the test case are Abbey, Barclays, Clydesdale, Halifax Bank of Scotland, HSBC, Lloyds TSB, Royal Bank of Scotland Group and Nationwide Building Society.