Banks lose test case over charges
Bank charges for unauthorised overdrafts are subject to regulation by the Office of Fair Trading (OFT) under "unfair contract" rules, the Court of Appeal held today.
In a test case brought by the OFT and major high street banks, appeal judges upheld a High Court decision last April that the fees charged to personal current account customers are subject to regulation by the watchdog.
The banks argued that the charges were exempt from the 1999 Unfair Terms in Consumer Contracts Regulations because they were legitimate "remuneration for goods and services supplied" to customers in the form of overdraft facilities.
They are now expected to apply to the Law Lords for permission to appeal to the House of Lords.
The appeal judges advised that, pending a decision from the Lords and the outcome of any OFT investigation into the fairness of the charges, thousands of County Court claims launched by disgruntled customers seeking refunds should remain on hold.
Customers who go into unauthorised overdraft or breach their agreed limit can be charged as much as £35 for a single bounced payment, although campaigners claim the cost to the banks could be as little as £2.50.
If upheld, the court's judgment could cost banks £2.6bn a year in lost revenue and lead to them having to make refunds of up to £1bn.
Members of the industry have also warned that losing the case is likely to lead to the end of free banking in the UK, with consumers instead having to pay a monthly fee or a fee for every transaction they carry out.
The banks involved in the test case are Abbey, Barclays, Clydesdale, Halifax Bank of Scotland, HSBC, Lloyds TSB, Royal Bank of Scotland Group and Nationwide Building Society.
The Master of the Rolls, Sir Anthony Clarke, sitting with Lords Justices Waller and Lloyd, held that the charges for unauthorised overdrafts were not part of the "core or essential" bargain between bank and customer and therefore an assessment of fairness was not precluded by the regulations.
After the judgment, GMTV's campaigning money saving expert Martin Lewis, who was present in court, said: "This is a massive victory for bank charge reclaiming."
The British Bankers' Association issued a short statement saying: "These are important points of law. The courts can now go on to clarify the fairness of charges.
"Before that can happen the Office of Fair Trading has to provide the courts with its views on how charges should be assessed."
Consumer group Which?, which has campaigned against the charges, called on the banks to start refunding customers.
Which? chief executive Peter Vicary-Smith, said: "The courts have made it clear the banks should now throw in the towel.
"This case has been going on too long and it's about time they tried to regain some of their dignity and paid customers their dues.
"This whole saga has severely damaged the banks' reputations. If they try to appeal in the face of such a clear decision, they will suffer further losses in the court of public opinion."
The OFT said: "This judgment confirms the OFT's long-held interpretation of this important aspect of consumer law, and is one that consumers themselves would identify with. It is also relevant to businesses across the whole economy.
"We are now analysing the implications of the judgment for our ongoing investigation.
"The OFT has already written to the banks with its provisional view on the fairness of the terms, setting out its concerns that they may be unfair. We expect to reach a final decision on fairness later this year."
Andrew Hagger, of Moneynet.co.uk, said: "This latest ruling is a small but positive step on the long and painful road for those holding out for a refund of their charges.
"Unfortunately while the OFT carries out further investigations the teetering piles of claims will continue to gather dust in bank head offices rather than provide the windfalls that so many consumers desperately need."
The British Bankers' Association stressed that, if today's judgment was upheld and the OFT was allowed to assess the charges for fairness, the final decision on whether a charge was fair lay with the courts, whose decisions could be appealed either way.
A Barclays spokesman said: "We are disappointed that the court has rejected the appeal but it is important to note that this is not yet a ruling on whether the charges are fair or not.
"We are set on reaching a resolution that gives clarity for consumers and banks alike and substantial progress has been made in a relatively short space of time.
"The earlier decisions from the High Court, ruling that historic terms and conditions relating to Barclays past charges and those in force in January 2008 are not unenforceable penalties, was a positive outcome and we will continue to work to show that the charges being assessed are fair.
"Barclays continues to believe that the regulations do not apply to charges of this sort, where the customer is using and paying for a service that is being offered, and that this point remains to be clarified."
History tells investors to keep their nerve when headlines scream 'crisis'
Rain doesn't stop profits at Andy Murray's £600-a-night hotel Cromlix House
Five Questions On: GB Energy's new tariff
Questions of Cash: 'I want a refund on my TV licence payments but they've turned my claim into a soap opera'
Bank-beating exchange rates on your international payments
- 1 Labour rallies behind Flint as deputy leader to offset a Corbyn win
- 2 Katie Hopkins reveals fear she will die during brain surgery to cure epilepsy
- 3 The difference between a psychopath and a sociopath
- 4 Dutch King Willem-Alexander declares the end of the welfare state
- 5 'Cool kids' can go on to become losers in later life, study finds
Yvette Cooper: Our choice is years of Tory rule under Jeremy Corbyn – or a return to a Labour government
Is Britain really full up? Are migrants taking our jobs? Leading academic answers the most common anti-immigration claims
Calais Migrant Crisis: Deputy Mayor of Calais labels Cameron's use of 'swarm' as 'racist' and 'ignorant'
While we fixate on Calais, the Home Office is quietly deporting dozens of migrants on 'ghost flights'
Calais crisis: The seven claims made about the migrants - and the reality
Calais crisis: For desperate migrants it is 'England or death' as they brave dogs, riot police and speeding trains
iJobs Money & Business
£30000 - £35000 per annum: Recruitment Genius: This is an exciting opportunity...
£13000 - £15000 per annum: Recruitment Genius: Are you passionate about custom...
£22000 - £25000 per annum: Recruitment Genius: Main purpose: Under the directi...
£35000 - £37000 per annum + benefits : Ashdown Group: Contracts Manager - City...
Day In a Page
Set sail for this four-bedroom farmhouse in Cowes. With five acres of land and an indoor pool, this home oozes character. There is even potential to let a one-bedroom annexe.
With five bedrooms, this spacious home offers beautiful gardens and modern interiors - set within the popular market town of Bingley.
A few miles from the seaside at Perranporth, this four-bedroom farmhouse sits amongst nine acres of idyllic grounds - including a lake and two barns used as holiday lets.
In the pretty market town of Bungay, this grade II-listed Mill House is arranged over four floors, offering four bedrooms and three reception areas.
This first-floor flat comes with two bedrooms, an impressive open-plan reception room and two lovely roof terraces.
This five-bedroom home comes with a range of outbuildings including a large barn which could be converted into a self-contained granny-flat or rental.
Moored at Taggs Island and reached via a pretty garden, this two-bedroom houseboat has a vaulted reception room and skylit garden studio - currently a beauty salon.
On the edge of the city, this six-bedroom home comes with an outdoor swimming pool and a large garage block that has annexe potential.
A contemporary house spread over three storeys, this three-bedroom detached home has large sliding doors that open out to the River Quaggy.
Moored in Chelsea's Cheyne Walk, this houseboat offers two double bedrooms and a teak deck that's ideal for al-fresco dining.
This former village bakery, dating back to the 17th century, is now a three-bedroom detached home just a few miles from the East Sussex coast.
On the picturesque Isle of Man, this four-bedroom character home has a ground-floor shop that's currently run as a newsagents and a flat that would make an ideal holiday let.
In a new collection of flats, this first-floor two-bedroom apartment offers ample entertaining space and a prime view of Furze Green from a private balcony.
This three-bedroom stone-built cottage currently trades as the village store with a restaurant in the annexe and family accommodation on the upper floors.
Previously two semi-detached properties, this five-bedroom home is spread over three floors with a large breakfast kitchen, orangery, office and gym on the second floor.
This five-bedroom home enjoys countryside views over the Blyth estuary to Southwold, offering flexible living space with a ground-floor annexe - ideal for use as a holiday let.
Close to the market town of Eye, this four-bedroom detached home offers a double-height living room which takes the place of the original, 19th-century, chapel nave.
Dating back to the 19th century, this four-bedroom home needs modernising. Spanning three storeys, the red-brick house has a fireplace, a small terrace and a cellar.
Just outside of Cambridge, this single-storey home offers three double bedrooms, a living room with vaulted timber ceiling and ladder steps that lead to a mezzanine study area.
This six-bedroom Georgian home is on three floors with open fireplaces, a two oven Aga, an annexe, and cottage gardens with outbuildings and a car barn.
A former coach house, Glebe Farm Stable is now a three-bedroom cottage with a double car barn, an attached office, kennels and an outbuilding that's currently used as a gym.
Located beside an impressive Victorian viaduct, this four-bedroom home has an open-plan living area that is glazed on two sides, with skylights and high ceilings.
A former furniture workshop, this three-bedroom home has high ceilings and painted brick walls, in a village setting only fifteen miles from the coast.
This five-bedroom stone townhouse features a pine staircase and an Inglenuk fireplace, double doors from the lounge give access to an enclosed courtyard.
This five-bedroom, detached home blends traditional and modern design; the sleek kitchen features a gas hob and oven set within an exposed chimney breast.
Capitalise on the fabulous views of Trevone Bay by taking two homes and creating one spacious boutique B&B. Just a cliff-top walk from Padstow.
Surrounded by woodland, this five-bedroom manor house has plenty of outdoor storage space in the form of three converted loose boxes, two smaller outhouses and a woodstore.
This six-bedroom home is set amongst three acres of grounds. Currently a large family home, Clift Hill has potential to make a B&B or countryside retreat, subject to change of use permissions.
This Grade II-listed three-bedroom home is situated on a private road, just a short walk from the sandy beaches of Frinton-on-Sea.
Less than five miles from Malmesbury, this four-bedroom cottage comes with equestrian facilities and gardens that extend to approximately three acres.
Spanning three storeys, this late-Victorian five-bedroom farmhouse is a spacious family home with a modern interior and B&B potential.
With an original church arch, this triplex one-bedroom church conversion has a light, spacious, feel and comes with a secure off-street parking space.
This recently-refurbished three-bedroom home has bi-folding doors that lead out to a decked seating area - ideal for alfresco dining this summer.
Well-located for coastal walks and popular restaurants, this detached four-bedroom home offers views over farmland, to the Solent, the Purbecks and Bournemouth.
If you love high ceilings, school conversions like this one are bang on the money. This two-bedroom flat is minutes from Burgess Park and the foodie haven at Borough Market.
Set within a church conversion in Bermondsey, this two-bedroom maisonette combines existing features, such as original arches and brickwork, with a contemporary finish.
This four-bedroom Edwardian home offers a combination of original features and contemporary design after a renovation by the current owners.
This four-bedroom home offers a vaulted ceiling in a breakfast room that's ideal for summer entertaining with doors that open to the patio and garden.
On the market for the first time in more than 50 years, this six-bedroom home is a project with vast potential - spread over three floors of living space.
Surrounded by rolling countryside, this four-bedroom barn conversion comes with a self-contained, one-bedroom annexe that could serve as an office or a holiday let.
Located near Harrogate town centre, this five-bedroom Victorian terrace is arranged over three storeys while a current study serves as an optional sixth bedroom.
A ground-floor flat in a country house, located a mile from Sway; this two-bedroom home would make an ideal weekend retreat on the edge of the New Forest.
On a popular residential lane in Caterham on the Hill, this four-bedroom family home offers a secluded garden and a convenient location for local schools and public transport.
Just a short walk from Westerham green, this three-bedroom cottage has a light kitchen with exposed brickwork and double doors that lead to a south-facing garden.
In a prime spot opposite the River Thames, this one-bedroom flat has an 18sq ft reception room with glass doors that open out to a private terrace.
Set in the hills above Llanwrda Village, west Wales, this 18th-century three-bedroom farmhouse has holiday-let potential from a separate barn conversion and annexe.
This charming end-of-terrace townhouse is arranged over three floors, with two double bedrooms and a private courtyard garden located at the rear of the property.
Located in the University area, this semi-detached five-bedroom home is arranged over three floors - there's even a rear garden and off-road parking too.
Only a few minutes' drive from the charming town of Marlow, this two-bedroom home sits on the private riverside estate of Harleyford.
This detached four-bedroom home in Middleyard is arranged over two floors, with features that include a wood-burning stove and bespoke oak staircase.