A shock ruling at the Supreme Court in London today (25 November) looks to have dashed the hopes of millions of people planning to claw back excessive bank charges.
To the surprise of many, the High Street banks won their appeal against the Office of Fair Trading’s (OFT) challenge to high levels of unauthorised overdraft charges. In short, the Supreme Court has ruled that the Office of Fair Trading doesn't have the right to investigate whether the charges are fair.
Millions unlikely to get bank charges refunded
Which? chief executive Peter Vicary-Smith said: “This is a bitter blow for the millions of people who have been patiently waiting to get their bank charges back.”
The test case had been brought jointly by the OFT and Abbey, Barclays, Clydesdale, Halifax Bank of Scotland and Lloyds TSB, which are now part of the same group, HSBC, Royal Bank of Scotland and Nationwide Building Society.
It followed an OFT investigation in 2008, which concluded that “unarranged overdraft charges are difficult to understand, not transparent, and not subject to effective consumer control”.
The Supreme Court unanimously ruled in favour of the seven major banks and the building society - which must have led to a collective corporate sigh of relief at them not having to stump up an estimated £1billion in refunds if they had lost the case. But Lord Phillips, president of the Supreme Court, left the door open for the charges battle to continue. He said: "It may be open to the Office of Fair Trading to assess the charge under other criteria."Lord Walker, one of the five Justices of the Supreme Court who heard the case, added Parliament “may wish to consider the matter further”.
Two year battle comes to abrupt end
The row has rumbled on for more than two and a half years and centres around charges of as much as £35 for a bounced cheque or returned payment. The bank’s critics say the actual cost of returning a cheque or refusing to make a payment is nearer £2.50. During the course of the investigation, banks have paid out around £560million to customers who complained about excessive charges, for fear that they would lose the battle.
The British Bankers' Association was quick to welcome the ruling, saying: “The Supreme Court has today confirmed that the banks' unarranged overdraft charges are an important part of current account services which the banks provide to their customers and that the amount of those charges is not assessable for fairness.”
Next steps for the OFT
So what’s next? The OFT said it would consider the judgment before making any decisions on where to go from here. “The OFT will now consider the detail of this judgment before it makes a decision on whether or not to continue its investigation into unarranged overdraft charging terms,” a spokesman said. "It will also explore with others the implications for consumers and for existing and future legislation and regulation.”
The OFT said it expects to make a further announcement in December. Meanwhile, for people who have been waiting to reclaim bank charges, the waiver set in place by the Financial Services Authority to halt any more claims or payments from the banks, has now been lifted, opening the door for anyone who has suffered from rip-off charges to make a complaint.
Is it worth making a complaint?
It looks unlikely at the moment that complaints will result in compensation being paid out by banks and the million or so who have already complained but have not yet had a payout may also end up empty-handed. An alternative may be to vote with your feet and move your account to another bank. But make sure you choose a bank with low charges or few fees.
Anyone angry at how they have been treated by their bank can make their feelings known by joining the Britain Needs better Banks campaign, run by Which? at www.bnbb.org.
