What does this week's ruling mean for me?
Although Thursday's judgment moves us one step closer to a potential clampdown on bank charges by the Office of Fair Trading, this was only the end of the first stage in a very long process. Unfortunately, if you've made a claim against your bank for unfair charges – and have been told that you have to wait for a resolution in the test case – the waiting isn't over yet.
The Financial Services Authority has told banks they don't have to pay any claims until the test case process is completed – and this could still be well over a year away.
Why is the process taking so long?
The test case is split into two parts. The first stage – which concluded on Thursday – was all about deciding whether or not bank charges were subject to the Unfair Terms in Consumer Contract Regulations (UTCCR) 1999. The judge ruled that they were, opening the door for the second stage, which will consider whether the charges really are unfair. Each of these cases is likely to be subject to appeals – regardless of the outcome – followed by a final appeal to the House of Lords (where a final and binding decision will be made). Even then, there is the possibility of the case continuing in the European courts. The first case started in January, and took almost four months to conclude – and it is unlikely it will reach the House of Lords before 2009.
Does Thursday's verdict mean the banks are likely to lose the next stage of the case?
Not really. In fact, Thursday's judgment wasn't all bad news for the banks. Although they lost their battle regarding the consumer contract regulations, the judge ruled in their favour when it came to the debate over whether bank charges could be considered to be a "penalty". It's a technical point, but if they'd lost here, it would have been much easier for the OFT to win the second stage of the case.
What happens next?
The banks and regulators need a few weeks to digest yesterday's 120-page judgement. They will then all get together on 22 May to decide what happens next. It is expected that the banks will confirm their intention to appeal the initial decision, while the OFT will get things moving for the second part of the case. Fortunately, the OFT doesn't have to wait for the result of the appeals to get the second case under way.
Much of the second hearing will revolve around the banks trying to prove that their charges relate to the costs they incur. For example, many banks still charge upwards of £20 for going overdrawn without permission. However, the OFT is likely to argue that the actual cost to the bank here is much less – perhaps only the cost of sending a letter, and the cost of providing the additional funds.
Can I still make a claim for unfair charges?
There's nothing to stop you putting in a claim for unfair bank charges now. If you've accidentally slipped into the red for the first time, and found yourself hit with nasty fees, it's well worth appealing to your bank's better nature and asking them to waive the charges. If you don't have any luck, try suggesting that you'll take your account elsewhere if they don't scrap the charges.
If you're making a large claim for several years' worth of charges, however, you're unlikely to get any resolution to your claim now – although there's nothing to stop you from filing it. The vast majority of banks and building societies are covered by the FSA waiver, meaning they don't have to process claims until the test case is resolved.
A small number of small providers are not covered by the waiver, such as ICICI, so you may still be able to pursue claims against these. To check whether your bank is covered by the waiver, visit www.fsa.gov.uk/pubs/waivers/details_disp.pdf.
If your bank does have a waiver, your claim will sit in the queue until the test case is over. You can make a claim for any charges levied within the last six years.
I've made a successful claim – can the banks take it back?
No. If you've already been paid out, the banks will not ask for the money back if they win the test case. However, if your claim is in the queue, it's very unlikely that you'll secure a payout if the banks win.
What will happen if the banks lose?
All the claims in the queue should be paid out if the banks lose. Furthermore, the OFT is likely to impose a cap on bank charges. It is thought that banks won't be allowed to charge more than £12 if you bust your overdraft limit.
Beware, however, that such a clampdown will only result in banks looking to recoup their revenue from elsewhere. Some commentators believe that it is only a matter of time before the banks will be forced to start levying a monthly fee for every current account holder.