The war against bank charges: Is this defeat?
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After years of waiting and with the hopes of millions people hanging in the balance, we have all been dealt an unexpected and crushing blow. Bank customers hoping to be refunded unfair overdraft charges have been let down by the Supreme Court judgement.
The court has overturned earlier court rulings that allowed the Office of Fair Trading to investigate the fairness of charges for unauthorised overdrafts. At stake in the case, which has run for over two years, is an estimated £2.6bn of annual income for the banks.
Campaigners said they were shocked and disappointed with the decision.
Unsurprisingly, the Banks have welcomed the ruling and pointed out that there have been major changes to current account packages recently that mean these unplanned overdraft fees could be avoided.
Seven banks and one building society wanted the court to overturn two previous rulings that said the OFT had the power to investigate unauthorised overdraft fees. Those who received payments from banks before the test case started will keep their money, because these pay-outs were made as “goodwill gestures”.
All new claims against banks were effectively suspended in July 2007 when the OFT and the banks agreed to stage the test case to see if the overdraft charges were legal or not.
The OFT has previously said that even if it lost, it would still try to use other powers, perhaps by instigating a full Competition Commission enquiry, to attack overdraft fees.
In explaining his ruling, the Supreme Court’s president Lord Phillips said that bank customers agreed to pay overdraft charges as part of the price of having a current account, so they fell outside the scope of the 1999 consumer contract regulations.
But Lord Phillips added that this was not the end of the matter as the OFT could still try to scrutinise bank charges under other parts of the regulations.
The judge did not give any explicit guidance as to how the judicial authorities should deal with the frozen cases.
Later the Judicial Communications Office said that each case would be considered on its merits by County Court judges. It has effectively said that people should apply to the court if they want their cases restarted, but there is no guarantee that they will succeed. Banks might also apply to have cases thrown out.
However, it said the Supreme Court judgement was quite lengthy so it could take some time for customers and the banks to decide what to do.
The Supreme Court ruling will come as a bitter blow to the consumer organisations who have campaigned against what they considered to be unfair overdraft charges. The Court said it would not allow an appeal by the OFT to the European Court of Justice.
The OFT said that it was “disappointed” with the judgement, it will now consider its options and will another announcement in December.
Research by the OFT published last year found banks earned around a third of their retail revenues from unarranged overdraft charges that were “difficult to understand, not transparent, and not subject to effective consumer control”.
The British Bankers Association, which represents the banks, says that it considers the decision as a “clarification of the law” rather than a “victory”.
So, in the war between ordinary people and greedy, grasping, faceless banks, a battle has been lost. It remains to be seen, however, if the war is now over.
