The banks have won a battle, but not the war

October 15th, 2008

There has been a set back in the ongoing court case against unfair bank charges since the banks have won the latest round of the High Court battle.

Judge Mr Justice Andrew Smith says most customers will not be able to use common law to challenge bank charges levied mostly between 2001 and 2007. However, NatWest customers might still have this legal avenue open to them after he failed to give their terms a clean bill of health.

The OFT wants legal confirmation that it can rule if these charges of up to £35 are fair or not. Customers have complained they have been unfairly overcharged hundreds, and sometimes thousands, of pounds when falling into the red.

Strangely, the banks want to protect the estimated £2.6bn a year of income they gather by charging people for going overdrawn.

The judge’s ruling followed a three-day hearing in July. His ruling has an impact on the thousands of claims for the refund of overdraft charges which are frozen in county courts.

These county court hearings were suspended last year when the Office of Fair Trading and eight banks agreed on a test case to clarify the situation with overdraft charges. After today’s ruling, they are likely to remain frozen for the foreseeable future.

The judge’s latest ruling focused on whether historic bank terms were unfair penalties under common law, and if customers who had been charged for going overdrawn could challenge them.

He decided that customers could not challenge Barclays, Clydesdale, HSBC and the majority of Abbey’s terms. A Barclays spokesman said they were ‘pleased’ with the decision.

The same was true for HBOS, except for Intelligent Finance’s terms which required more examination. More discussion was also needed regarding the terms and conditions of Lloyds TSB’s accounts.

The judge said that Royal Bank of Scotland Group, which owns NatWest, needed to provide clearer arguments about their terms before he could give them clearance.Bank ‘relief’

‘Some banks will be breathing a sigh of relief as the judge appears to have decided that these charges were not penalties under common law,’ said Marc Gander, of the Consumer Action Group.

An OFT spokesman said: ‘This is another staging post in a complex legal process. We are progressing our investigation as quickly as possible and are in continuing discussion with the banks about our provisional views on the issue of fairness.’

The judge did indicate that, even though common law largely could not be used to challenge historic overdraft fees, the OFT has the authority to examine these fees under the 1999 Unfair Terms in Consumer Contracts regulations.

There are other legal avenues for customers to explore and they may still get their money back.

The banks will appeal against the OFT’s initial High Court victory in April . The High Court ruled that the OFT can assess whether fees are unfair. Another High Court hearing is expected to start in the new year on the substantive issue of whether or not bank overdraft charges are unfair.

Only after these hearings, and any possible subsequent appeals, will people finally know whether they can claim back overdraft charges.

This entry was posted on Wednesday, October 15th, 2008 at 6:46 am and is filed under Personal Loans. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

The banks have won a battle, but not the war

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