Lloyds wins legal victory against customer seeking charges refund

A bank has won a landmark victory against a customer who was claiming a refund of charges. The news is a blow for the campaign to reclaim hundreds of millions of pounds of penalty fees from financial institutions.

A judge at Birmingham County Court ruled yesterday that Lloyds TSB legally levied fees and interest totalling more than £2,000 on a current account customer. The unauthorised borrowing charges on Kevin Berwick were deemed reasonable and a legitimate part of the bank's service. The ruling was the first time the legality of charges - of up to £39 a time - had been tested in court, but campaigners insisted it did not mean other cases against banks would fail and urged people to continue claiming.

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One of the campaign's websites said three million claim-letter templates - for those seeking refunds of penalty fees - had been downloaded.

The Independent has been encouraging customers to claim back the charges, which the Office of Fair Trading (OFT) has ruled are so high they are unfair. Under the law, bank campaigners say bank charges should reflect the costs involved, and the OFT is determining what would be a reasonable level.

In his case against Lloyds TSB, Mr Berwick argued that charges for going over an agreed overdraft limit were so high he should be reimbursed for £1,982.37 in fees and interest.

In a written verdict Judge Cook disagreed, ruling: "There is no evidence before me from which I could conclude that, taking into account the other elements of the service provided by the banks without charge, these particular charges were unreasonable."

The judge said he had established that the fees were not charges for breach of contract but part of the price of the bank's service.

Lloyds TSB said it was pleased with the ruling because the judge had agreed charges were not default or penalty fees but service charges. Mr Berwick may yet appeal against the verdict.

Marc Gander, of the Consumer Action Group, said he was "very disappointed" by the judgment. But he added: "This is a judgment by a district judge. It has no binding effect on other cases. We encourage people to keep on claiming."

David Kuo, a spokesman for personal finance website Fool.co.uk, said the judgment might make banks less willing to capitulate over claims. "But that does not mean customers should not ask for their money back if they believe it has been taken unlawfully," he said.

Martin Lewis, the founder of Moneysavingexpert.com, said: "To all those reclaiming charges it's a case of 'don't panic'. Across the country the banks are still paying out many tens of thousands of pounds a day, and the weight of huge numbers of successful reclaims easily outweighs this one anomalous result."

He added: "This specific case is the one rare occasion where the bank seems to have got lucky with a sympathetic judge following their pro-forma response. It's a shame for Mr Berwick but it doesn't have any real impact on the other cases... the call is the same; keep on reclaiming."