Consumers await High Court ruling on 'unfair' bank charges

Britain's banks will discover today whether they will escape more than a million claims for compensation related to unauthorised charges. The High Court is set to rule on a test case brought by the Office of Fair Trading, which follows a lengthy investigation into the fees charged by banks when customers breach overdraft limits or bounce cheques.

If the judge finds in favour of the OFT – ruling that UK bank charges are bound by the "Unfair terms of consumer contracts" legislation – it will open the door for a new OFT inquiry, which will seek to determine whether or not the banks' current account charges are indeed "unfair".

However, a win for the banks today would deal a heavy blow to Britain's consumers, giving UK banks approval to continue charging as they see fit.

Regardless of the result, the losing party is expected to appeal against the decision, while the subsequent Court of Appeal ruling is then likely to be taken all the way to the House of Lords.

As a result, a definitive judgment is likely to still be more than a year away – consigning British consumers to many more months of high charges.

Although it is believed the OFT has already begun work on a secondary inquiry – which is expected to rule that current bank charging structures are unfair – it will need the co-operation of the banks to conduct a thorough and binding investigation. Even if the banks lose today, they are likely to remain reluctant to co-operate with the OFT until the results of any appeals are published.

After a campaign led by The Independent, hundreds of thousands of consumers have tried to reclaim bank charges over the past 18 months. Last year, however, the Financial Services Authority allowed the banks to stop all compensation payouts pending the resolution of the test case. In the meantime, most banks are continuing to levy charges above the likely level that the OFT would sanction.

Two years ago, the OFT ruled that credit card providers should not charge consumers more than £12 for making a late payment. In many cases, lenders were forced to slash their charges by more than 50 per cent to come into line with the guidance. It is thought that a victory for the OFT would result in a similar limit on charges for consumers who breach their overdraft limit.

Which?, the consumer group that has been lobbying for a reduction in bank charges, called for the banks to begin repaying consumers' complaints immediately if it loses the case today.

"If the judge finds in favour of the OFT, then the banks should do the right thing and resolve their customers' claims as quickly as possible," said Doug Taylor, Which?'s personal finance campaigner. "If they try to drag the process out any longer, they will only be doing more damage to their reputations. Every second that passes is costing consumers £111. In fact, by Sunday, the banks will have hit their customers with £1bn in unauthorised overdraft charges since the test case began in January."