Yesterday's Supreme Court ruling will have surprised and disappointed millions of bank customers. It surprised and disappointed this newspaper, too. Having campaigned against the swingeing sums levied by banks on account holders who inadvertently went into the red or transgressed their overdraft limit, we had hoped that the judges would uphold the rulings of lower courts, and allow the Office of Fair Trading to investigate the charges. This did not happen.
The ruling means that this particular avenue for those seeking redress is now closed. Permission to appeal to the European Court was also denied. So far as the judicial process is concerned, therefore, all options have been exhausted. This is a setback; but it need not, and should not, be the end of the quest.
Millions of bank customers were, over the years, required to pay overdraft charges that bore no relation to the scale of their borrowing or the costs incurred by the bank. Not only were the fees themselves lacking in logic or transparency, they accrued interest if not immediately paid. People found themselves with debts out of all proportion to the sum they had initially owed. The banks' charging practices came to look like another means of raising profits and holding the customer to ransom.
The banks that contested the case based their appeal on what they argued would be a "deluge of litigation" if the decision went against them. Clearly they also feared the loss of the estimated £2.6bn they earned annually from such fees. And as the Supreme Court ruling neared, they held out the prospect of an end to free current-account banking, including for customers who remained in credit. Scare-mongering this may have been, but it paved the way for a backlash by account-holders who remain in the black and feared they would effectively be penalised for the imprudence of others.
Free banking, of course, has always been a bit of a fiction. Banks earn handsomely from the money customers keep in their current accounts. But those who stay in credit accept what is in effect a derisory interest rate for the sake of convenience and simplicity. The threat that in future every transaction would incur a charge, including withdrawals from cash-machines, would have altered this unspoken contract.
But this is not why the Supreme Court made the decision it did. It ruled on the technical point that in opening a bank account, customers accepted the bank's conditions, and it found that there was no legal case for the banks to answer. What it did not do, though, was to reject the argument that customers had been treated unfairly. Indeed, it positively invited the OFT to use the other mechanisms it has at its disposal in an effort to secure redress.
In other words, the battle for fair treatment for banking customers can go on, though no longer through the courts. This complicates matters and means that compensation could be longer in coming and harder to attain. But while the outcome is frustrating for the many account-holders whose claims remain in limbo, it must also be recognised that, simply by virtue of being fought through the courts, this case achieved a great deal. It highlighted the lack of transparency in charging and the arbitrariness with which many banks treated their customers. As a result, fees have generally been reduced and terms and conditions clarified. We urge the OFT to rise to the challenge, and pick up where the Supreme Court judges left off.