David Prosser: A loss of nerve at the OFT

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Outlook: A day after the incompetence of the Competition Commission led to BAA winning its appeal against a ruling from that watchdog, the Office of Fair Trading has had to confront the reality of its own regulatory cock-up.

A month ago, the Supreme Court ruled that the OFT was not entitled to investigate banks' unauthorised overdraft charges because it had brought the case under a section of the law that was effectively beyond its reach. Yesterday, the OFT said that following that ruling, it would drop its investigation.

The OFT's logic is hard to follow. Having spent so long looking into bank charges, it presumably believed there was a case for the sector to answer (it said as much yesterday). Now, having lost a legal case on a technicality, it seems to be giving up altogether.

That leaves more than a million people seeking refunds of charges from the banks to fight their cases alone. Most of those cases are likely to be dismissed as the banks move to close the book on this shameful little episode.

This newspaper has been a leader of the campaign for bank charges since the very beginning. But whatever you think about the rights and wrongs of the case, this is no way for a regulator to conduct its business.

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