Banks reveal plans to fight court verdictover 'unfair' charges

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The Independent Online

Britain's banks will unveil plans to appeal against the first stage of the bank charges test case today, as they meet with the judge to decide how the case should proceed.

The banks lost the first round of the battle last month, when Mr Justice Andrew Smith sided with the Office of Fair Trading and ruled that current account charges are subject to the Unfair Terms in Consumer Contract regulations.

As a result, the OFT is expected to ask the judge today to oversee a new case to determine whether or not the banks' charges are indeed "unfair" and in breach of the regulations.

Meanwhile, the banks will ask the judge for leave to appeal against his original verdict, and are likely to take the case all the way to the House of Lords if they are unsuccessful.

Although a final resolution is still a long way off, the banks' decision to appeal should not delay the process. The judge is expected to allow the new case to get under way in the High Court, at the same time that the appeal process for the first case is taking place in the Court of Appeal and House of Lords.

Today's case management conference will also see the judge present a distilled version of his 119-page judgment on the first part of the test case, giving both sides some more detail as to what it might mean in practice.

Although the OFT won the main battle in the first case, it is possible that it will also launch an appeal today – against the judge's ruling that the banks' charges cannot be considered to be a penalty.

It is thought that any appeal cases will take around two months to reach court, and will last for a few days, meaning a verdict is unlikely before the end of the summer. A House of Lords hearing would then follow some months later.

The second part of the test case is also likely to take several months to get set up, and is expected to last for several weeks, with a judgment unlikely before the end of the year. Thereafter, there are likely to be further appeals by the losing side.

The earliest that consumers can expect a final resolution now looks to be the middle of next year, although some believe it may be 2010 before the case is settled.

In the meantime, the thousands of customers who are hoping to be given refunds for allegedly unfair bank charges, are being forced to wait. Last year, the Financial Services Authority gave almost all banks a waiver, allowing them to stall any claims for the refund of charges until the test case is settled.

A loss for the banks could see them forced into refunding billions of pounds of historic charges, and would also see them lose out on much of the £3.5bn that they currently earn from current account charges every year.

Two years ago, the Office of Fair Trading clamped down on credit card fees, preventing banks from charging more than £12 each time a customer makes a late payment. It is thought that a win for the OFT in the bank charges test case would result in similar restrictions being placed on the current account market. At the moment, some banks charge more than £30 to customers who bust their overdraft limit, and as much again if a cheque is bounced at the same time.

However, David Black, the head of banking at Defaqto, warns that a clampdown on overdraft charges is likely to result in the end of free banking – forcing banks to charge a monthly fee for all customers.

According to a YouGov survey to be published today, more than half of the UK's banking customers wrongly believe that the UK has the highest bank charges in the world. In fact, Britain is one of the three cheapest countries in the world, when it comes to retail banking.

The survey, commissioned by technology company EDS, also revealed that only a third of people would favour a monthly fee over other bank charges.

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