Challenge to bank charges begins

Banks came under pressure to reduce their charges yesterday as a legal challenge that could trigger refunds of millions of pounds to customers got under way.

A High Court judge began reading documents in the case brought by the Office of Fair Trading against seven high street banks and one building Society. Legal arguments begin tomorrow.

The Liberal Democrat shadow chancellor, Vince Cable, said: "Banks are not charities and it is perfectly acceptable for them to levy charges when customers breach the terms of their bank accounts. However, trying to pretend that it costs upwards of £30 to return an unpaid direct debit is laughable."

Carl Belgrove, of the National Consumer Council, called on the banks to "stop making easy money" and take a responsible attitude to their impact on customers. He added: "A charge of over £30 for an unpaid standing order is enough to trigger a spiral of debt that many people on low incomes may never fully recover from."

In the case being heard at International Dispute Resolution Centre on Fleet Street, London, the OFT is claiming that the bank's charges for unauthorised borrowing on current accounts fall under consumer contract regulations and so have to be proportionate.

The banks are believed to have hired a QC each to defend their cases; the OFT has retained one QC.