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This article was first published on guardian.co.uk on Monday April 21 2008. It was last updated at 15:03 on April 21 2008.
HSBC has already repaid £11m in fees. Photograph: Sarah Lee
The long-running controversy over bank charges could come a step closer to being resolved this week after it was announced that the judge hearing the test case would be handing down his judgment on Thursday.
The case, which began in January, saw the Office of Fair Trading (OFT) take on eight banks and building societies over the fees levied when a current account goes over its agreed overdraft limit, or a cheque or direct debit is bounced.
According to the OFT, banks receive up to £3.5bn a year in unauthorised overdraft fees - nearly £10m a day.
They charge up to £39 for a bounced cheque, standing order or direct debit, and critics of the system say this does not reflect the actual cost incurred by the banks, which could be as little as £2.
The OFT claims the charges are illegal under the Unfair Terms in Consumer Contracts Regulation 1999.
Should it win the case it is likely to force current account providers to cut fees, and the banks could be made to return millions of pounds to customers.
Earlier this year HSBC, one of the banks involved in the case, admitted it had already repaid £11m of fees and could face claims for a further £300m.
Mr Justice Andrew Smith, who heard the case in January this year, listened to 14 days of evidence put forward by the OFT and the banks, who represent 90% of the current account market.
The consumer group Which? outlined three of the possible outcomes for the test case:
· An outright win for the OFT: The court could rule that all terms and conditions (T&Cs) for the test case banks over the past six years can be assessed for fairness
· An outright win for the banks: The court could rule that none of the T&Cs used by any of the test case banks over the past six years can be assessed for fairness
· Something in between: The court might decide that some T&Cs are subject to fairness assessment, while others are not. Distinctions could be drawn on the basis of the type of charge, the bank in question, or the version of T&Cs in question
In each scenario it said it would then be necessary to assess whether the court's ruling also applied to banks not involved in the case.
A straightforward win for either side would make this easier, but is likely to lead to an appeal by the losing side, which might not be heard until 2009.
The OFT said it would be reading the judgement on Thursday and considering it carefully before making a statement.
The fees became a subject for consumer rebellion last year after the OFT ruled that similar fees for late and unpaid credit card repayments were unlawful and consumer groups started to encourage customers to claim refunds.
More than 1m reclaim letters were downloaded from websites, and in some cases customers were able to win back thousands of pounds from the banks, who refused to contest the claims in court.
The Financial Services Authority had allowed account providers to put reclaim letters on hold until the test case was resolved.
This may be extended until the outcome of any appeal, so it could be another year before consumers find out if they are entitled to refunds.
Bank charges ruling due on Thursday
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This article was first published on guardian.co.uk on Monday April 21 2008. It was last updated at 15:03 on April 21 2008.
HSBC has already repaid £11m in fees. Photograph: Sarah LeeThe long-running controversy over bank charges could come a step closer to being resolved this week after it was announced that the judge hearing the test case would be handing down his judgment on Thursday.
The case, which began in January, saw the Office of Fair Trading (OFT) take on eight banks and building societies over the fees levied when a current account goes over its agreed overdraft limit, or a cheque or direct debit is bounced.
According to the OFT, banks receive up to £3.5bn a year in unauthorised overdraft fees - nearly £10m a day.
They charge up to £39 for a bounced cheque, standing order or direct debit, and critics of the system say this does not reflect the actual cost incurred by the banks, which could be as little as £2.
The OFT claims the charges are illegal under the Unfair Terms in Consumer Contracts Regulation 1999.
Should it win the case it is likely to force current account providers to cut fees, and the banks could be made to return millions of pounds to customers.
Earlier this year HSBC, one of the banks involved in the case, admitted it had already repaid £11m of fees and could face claims for a further £300m.
Mr Justice Andrew Smith, who heard the case in January this year, listened to 14 days of evidence put forward by the OFT and the banks, who represent 90% of the current account market.
The consumer group Which? outlined three of the possible outcomes for the test case:
· An outright win for the OFT: The court could rule that all terms and conditions (T&Cs) for the test case banks over the past six years can be assessed for fairness
· An outright win for the banks: The court could rule that none of the T&Cs used by any of the test case banks over the past six years can be assessed for fairness
· Something in between: The court might decide that some T&Cs are subject to fairness assessment, while others are not. Distinctions could be drawn on the basis of the type of charge, the bank in question, or the version of T&Cs in question
In each scenario it said it would then be necessary to assess whether the court's ruling also applied to banks not involved in the case.
A straightforward win for either side would make this easier, but is likely to lead to an appeal by the losing side, which might not be heard until 2009.
The OFT said it would be reading the judgement on Thursday and considering it carefully before making a statement.
The fees became a subject for consumer rebellion last year after the OFT ruled that similar fees for late and unpaid credit card repayments were unlawful and consumer groups started to encourage customers to claim refunds.
More than 1m reclaim letters were downloaded from websites, and in some cases customers were able to win back thousands of pounds from the banks, who refused to contest the claims in court.
The Financial Services Authority had allowed account providers to put reclaim letters on hold until the test case was resolved.
This may be extended until the outcome of any appeal, so it could be another year before consumers find out if they are entitled to refunds.
