Bank charges ruling a blow for consumers
Today's ruling is a blow for the millions of consumers who had hoped to reclaim more than £1 billion of the fees.
More than one million claims to have the charges refunded have been put on hold since the test case was first launched in 2007, while a further eight million people are estimated to have paid the charges since July 2001, but not yet submitted a claim to get their money back.
But the ruling is better news for the millions of consumers who do not dip into the red without permission or breach their agreed overdraft limit, as the banks had warned that losing the test case could herald the end of free banking in the UK.
The news is also a relief for the beleaguered banks who faced having to make refunds totalling more than £1.1 billion if they had lost the case, while they were also likely to have lost a significant chunk of the £2.6 billion of revenue they receive from the charges each year.
But the Supreme Court's decision that the charges do not come under "unfair contract" rules and are therefore not subject to regulation by the Office of Fair Trading, is unlikely to be the end of the issue.
Handing down the ruling, Lord Phillips, president of the Supreme Court, said: "It may be open to the Office of Fair Trading to assess the charge under other criteria."
The OFT said today that it would consider the judgment before making a decision on whether or not to continue with its parallel investigation into unauthorised overdraft charging terms.
It added that it would be seeking discussions with banks, consumer groups, City regulator the Financial Services Authority and the Government in the light of the ruling.
The Government also said it was "determined" to ensure the system of unauthorised overdraft charges was made fairer for consumers in the future.
Sarah McCarthy Fry, Exchequer Secretary to the Treasury, said: "The Government will work with the OFT and FSA to reach a new framework for fairer bank charges going forward."
Customers who go into unauthorised overdraft or breach their agreed limit can be charged as much as £35 or more for a single bounced payment. Campaigners claim the actual cost to the banks could be as little as £2.50.
Industry commentators had warned that without these charges, existing free current accounts could be replaced with ones that either have a flat monthly fee or charge for every transaction carried out, as is common in many countries around the world.
But while banks will no longer face the prospect of being forced to reduce their charges as a result of the test case, the legal action has still triggered changes in the way the charges are levied.
Many banks had already altered the structure of their unauthorised overdraft fees ahead of today's ruling.
Some banks have introduced tiered charges, while others have gone to daily fees, flat monthly charges or lower one-off fees, and many have also introduced caps on the total amount of charges that people can run up in one month.
Banks are also likely to continue the process of migrating customers on to more profitable packaged accounts, under which consumers pay a monthly fee in exchange for a range of services on top of their current account, such as free annual travel insurance and breakdown cover.
Around 45% of current accounts now charge a monthly fee of some kind, up from just a third in 2006.
- 1 Malaysian cyclist could face disciplinary action after 'Save Gaza' gloves protest
- 2 Is Gideon Levy the most hated man in Israel or just the most heroic?
- 3 Fifty Shades of Grey trailer provokes moral outrage from US parenting groups
- 4 McDonald’s removes chicken nuggets from the menu in Hong Kong amid major food scare
- 5 Students offered grants if they tweet pro-Israeli propaganda
Malaysia Airlines MH17 crash: Vladimir Putin is given 'one last chance' to end hostilities in Ukraine
The 'scroungers’ fight back: The welfare claimants battling to alter stereotypes
The truth about conspiracy theories is that some require considering
Arizona execution lasts two hours as killer Joseph Wood left 'snorting and gasping' for air
Malaysia Airlines MH17 crash: Ukrainian military jet was flying close to passenger plane before it was shot down, says Russian officer
Malaysia Airlines MH17 crash: Massive rise in sale of British arms to Russia
iJobs Money & Business
£600 - £650 per day: Orgtel: Conduct Risk Liaison Manager - Banking - London -...
£18000 - £23000 per annum + Comission: SThree: SThree, International Recruitme...
£280 - £300 per day + competitive: Orgtel: Test Analyst, Edinburgh, Credit Ris...
£20000 - £25000 per annum + OTE £40,000: SThree: SThree Group have been well e...
Day In a Page
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village
A one-bedroom, luxury apartment with private gym and concierge service in Moorgate
A four-bedroom house in Hermitage Gardens with three reception rooms and landscaped gardens
A seven-bedroom Grade II-listed property with a separate self-contained apartment
A five-bedroom Victorian house with three reception rooms and galleried landing, £695,000
A six-bedroom farmhouse with five acres of land in a former cloth-making village
A secluded seven-bedroom detached house with large private garden, £490,000
A three-bedroom cottage overlooking Sarratt village green with open fires and solid oak floors
A three-bedroom maisonette flat in a Grade I-listed, Georgian townhouse in a sought-after location
A one-bedroom apartment located within a private gated development, north of Turnham Green
Look forward to a brighter future at two-bedroom Sunny Cottages, ideal for Londoners looking to downsize
A three-bedroom red-brick cottage with outbuildings and pretty gardens, £200,000
This three-bedroom flat within a former textile factory spans the corner of the fourth floor and has a balcony
A charming four-bedroom Oxfordshire cottage with oak floors and chunky-beamed ceilings, £465,000
A beautiful one-bed flat in a sought-after portered block, with access to Norland Square communal gardens
A one-bedroom flat within a Sixties school conversion with high-spec design and open-plan kitchen, close to Lambeth North Tube, £435,000
A 17th century four-bedroom house, with open fireplaces, cellar and pool, £600,000
A three-bedroom, coach house with luxury open-plan living space and contemporary breakfast bar