Judgment looms in overcharging row

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The Independent Online

Customers may be able to win payouts of hundreds of millions of pounds from banks again this year.

Just how much, however, will hang on the words of a judge sitting in the Victorian splendour of the Royal Courts of Justice on the Strand, in London.

Next week, a High Court judge will start hearing a case brought by the Office of Fair Trading (OFT) that seeks to establish once and for all whether bank charges of up to 30 a time are illegal, as many lawyers believe.

A decision in the OFT's favour could re-open the floodgates to tens of thousands of claims that have been on hold since July 2007. A decision against could blast a hole in the ranks of customers advancing against the institutions, who are likely to refuse to pay out any more money to settle claims for current accounts. Whatever the decision, though, there are still many other ways the public can claim back excessive finance charges.

Claims for repayment of credit card fees and payment protection insurance (PPI) are not affected by the OFT case and may still be made. Indeed, the emerging payment protection scandal may dominate the great bank charge revolt in the long run.

Since The Independent began its bank campaign in January 2007, most attention has been on current account fees for unauthorised borrowing, for exceeding an agreed overdraft either by bouncing a cheque or direct debit or taking too much cash out of an ATM.

Campaigners believe these charges are excessive under the 1999 Unfair Terms in Consumer Contract Regulation, which holds that "penalty fees" must not exceed costs, in this case no more than a few pounds a time.

The banks, however, insist their charges are "service charges" that are not covered by the legislation and it is the applicability of the legislation that the High Court case will settle. Depending on the judgment, expected no later than May, the OFT will launch a second case to prove that the fees are illegal. This second case should be resolved by the end of 2008. Customers might then expect payment of claims, which cost the high street banks at least 500m in 2007.

Regardless, customers may apply for refunds of credit charge charges and will generally win refunds of any charge above the OFT "reasonable" figure of 12. Claims may also be made for payment protection, for loans and credit cards; if the terms were not explained properly; undue pressure was applied or the policy holder had an existing medical condition.

The PPI industry is worth 5bn a year. But the policies offer little protection if a holder falls ill or loses a job.