Breakthrough in battle over bank charges
Customers move closer to recovering £1bn after Court of Appeal ruling
One million customers moved closer to getting refunds from their banks yesterday when judges ruled that charges of up to £38 for unauthorised overdrafts can be tested for fairness.
In a victory for The Independent's campaign against bank charges, the Court of Appeal rejected the banks' case that the fees were part of the "core" agreement with customers rather than extra payments subject to consumer legislation. The decision could result in refunds of up to £1bn.
In April 2007, the Financial Services Authority halted thousands of separate legal claims for refunds against the banks to allow for a definitive ruling on the legality of the charges under the 1999 Unfair Terms in Consumer Contracts Regulations (UTCCR). Upholding a decision by the High Court in favour of the OFT last year, the Master of the Rolls, Sir Anthony Clarke, agreed the UTCCR applied to overdraft charges and denied the seven institutions leave to appeal.
But in a statement, the British Bankers' Association disclosed that the group – Abbey, Barclays, Clydesdale, HSBC, Lloyds, RBS and the Nationwide Building Society – would petition the law lords for the right to appeal to the House of Lords.
In the meantime, there will be no payouts to nearly one million customers whose refund claims are with the banks, nor the thousands of litigants going through the courts.
The Court of Appeal advised that a stay on claims for refunds in the county courts should not be lifted until the OFT case, while the FSA also declined to lift a waiver exempting banks from processing refunds.
Welcoming the ruling, the OFT said it confirmed its "long-held interpretation" of the law, adding that it expected to reach a decision on the fairness of the charges later this year.
Campaigners said they hoped the refunds would be handed out within a year. Martin Lewis, founder of the website Moneysavingexpert.com, said: "This is a fantastic day for bank-charge reclaiming. It's up to the OFT to decide whether bank charges are unfair – [but] the smiles on the OFT's faces in court shows it's highly likely it will find that [they] are."
Speaking after the verdict, the consumer group Which? called on the banks to start refunding customers without delay. "The courts have made it clear the banks should now throw in the towel," said its chief executive, Peter Vicary-Smith. "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."
Overdraft charges are thought to earn the banks around £2.6bn a year, and some may end "free banking" in an attempt to replace the income they lose from charges, many of which have already been reduced. Bouncing a cheque – for which some banks charge £38 – is thought to cost as little as £2.
Bank charges: The state of play
What is the case about?
The OFT is bringing a test case against leading banks because it suspects that charges of up to £38 a time for unauthorised overdrafts are illegal, as they do not reflect the true cost to the banks. It hopes to prove that a law on unfair terms in contracts applies to the charges.
So current account holders will get their money back?
Quite possibly, but not yet. The banks involved hope to challenge the ruling in the House of Lords.
What will happen to my claim?
All 971,052 claims with the banks are still frozen.
What happens now?
The Lords is expected to rule within weeks whether the banks can appeal, after which the banks will have one month to decide if they want to go ahead. If they do, the case is likely to be delayed for months.
And if the Lords reject the case?
The OFT is likely to decide that the charges are unfair and then may seek to prove that point in court. If it decides not to fight the case, the OFT could try to agree with the banks on what constitutes a reasonable current account fee. Such a deal should lead to the full or part refund of the charges.
Independent Partners; request a free guide on NISAs from Hargreaves Lansdown
How to cut the cost of car insurance: A five-step guide to getting a better deal
How not to go into the red over Christmas
Simon Read: The only place for debt is out in the open, don't be afraid to ask for advice
Families pay the price of superfast broadband
Donald MacInnes: I was fired for making up horoscopes and then my lifestyle deteriorated
- 1 This is what the one in ten British men who pay for sex need to know
- 2 Lee Evans announces retirement from comedy on The Jonathan Ross Show
- 3 These grandmas smoking weed for the first time are wonderful
- 4 Woman opens professional cuddling shop – gets 10,000 customers in first week
- 5 Angelina Jolie confuses everyone with 'ay up me duck' East Midland's greeting to Derby actor Jack O'Connell at awards show
'Muslims pre-date Columbus in discovering America,' says Turkish president Erdogan
France 'blocks' Russian sailors from boarding a warship
Former Tory PM Sir John Major says 'we would not have an NHS without migrants'
G20 summit: David Cameron warns Vladimir Putin that Russia's relationship with the West is at a 'fork in the road' over Ukraine
Myleene Klass: Ed Miliband 'strikes back' by comparing UK's need for Labour's mansion tax to Hear'Say track
Coalition government has 'shifted money from poorest to better-off' through welfare cuts and tax reductions, study claims
iJobs Money & Business
£20000 - £25000 per annum + OTE £35,000: SThree: We consistently strive to be ...
£50000 - £90000 per annum + benefits: Ampersand Consulting LLP: Markit EDM (CA...
$175 - $200 per annum, Benefits: full benefits: Carlton Senior Appointments: P...
Not specified: Carlton Senior Appointments: Senior MD Financial Advisor - San ...
Day In a Page
A deceptively spacious, beautifully presented Georgian home with 3000sq ft of living space and five reception rooms
A five-bedroom Victorian home with four receptions, superb gardens and paddock in Pembury
An eight-bedroom house on the south side of the The Green with cinema, wine cellars and summer house
This 17th century beauty is full of rustic cosiness, while the detached home office means you can also run a business
This five-bedroom red-brick beauty overlooks the village green and sits in just under two acres of land
Four exclusive apartments in a Grade II-listed former medical school with 2,275 sq ft of living space and 18ft ceilings
A five-bedroom terraced house on the popular Peterborough Estate, ideally located for both Eel Brook Common and South Park
A state-of-the-art farm-building conversion on the former Cliveden Estate, with 11,420sq ft of internal space, cinema and wine cellar
A three-bedroom, 15th-century cottage with original features in the picturesque village of Sissinghurst
A six-bedroom terraced house with large south-facing roof terrace, cinema room and wine cellar
A new seven-bedroom home built in Queen Anne-style with swimming pool and parkland views in Mortimer
A listed, four-bedroom farmhouse in the rural hamlet of Rushall with detached barn, four acres of gardens and paddocks
A first-floor flat with two bedrooms, a spacious reception room and communal grounds in a leafy part of London
A three-bedroom flat with a spacious rootop terrace and balcony, accessed from a private gated courtyard
A Grade II-listed pile with six bedrooms, stables and 39 acres of grounds in Standlake
A two-bedroom flat with boutique hotel-style interiors, close to the foodie haunt of West End Lane
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
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