We have won the battle, but not yet the war
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A day many people have been anxiously waiting for arrived with relatively little fanfare yesterday. A judge in the high court ruled that the Office of Fair Trading (OFT) can rule on whether bank charges are unfair.
Thousands of cases currently on hold in the county courts will remain frozen until 22 May, by which time the banks must decide whether they are going to appeal against the ruling.
Since the beginning of 2006, hundreds of thousands of customers have reclaimed hundreds of millions of pounds from their banks, arguing the charges were too high and unfair. The banks have consistently argued that their charges were fair and reasonable. Campaigners have welcomed the judge’s ruling as a victory for consumers.
The OFT first agreed last July, with seven banks and the Nationwide building society, to stage the test case to decide if it had the power under consumer contract regulations to regulate overdraft charges.
At stake is not only the ability of aggrieved customers to reclaim their charges but also the ability of the banks to generate an estimated £3.5bn a year in income from levying them.
If the banks eventually suffer a complete defeat on the issue, then it has been widely predicted that they will try to recoup their losses by abandoning the long standing policy of so-called “free banking” for customers in credit. Instead, monthly or annual charges could be introduced as standard for running an ordinary current account.
However, things are not cut and dry. The banks will now begin a lengthy series of appeals. The judge decided against the OFT on two points. He said most of the banks’ terms and conditions were plain and intelligible. And he added that the charges could not be challenged under common law
There are extreme doubts about whether banks would follow through with their threat to start charging for current account services. With increasing competition from online banking providers such a move would see a mass exodus of customers from the big banking companies and towards the cheaper, smaller banks that often offer better prices and services.
What is clear from yesterday’s announcement, however, is that those people waiting to hear about their individual cases should not expect an immediate payout.
