The Supreme Court has today ruled in favour of the banks over the fairness of unauthorised overdraft charges.
The legal battle, which has been ongoing since July 2007, will come as a devastating blow to consumer groups who have been campaigning for many years about the charges, which they deem to be unfair.
However, Lord Phillips, president of the Supreme Court said: “This will not close the door on the Office of Fair Trading’s investigations and may well not resolve the myriad cases that are currently stayed [put on hold] in which customers have challenged the relevant charges.”
Lord Phillips added: “It may be open to the Office of Fair Trading to assess the charge under other criteria”.
Approximately 1 million people have already filed legal claims for refunds and these cases may now be dismissed.
However, the consumer watchdog said even if it lost, it would still try to use other methods to attack overdraft fees - perhaps by instigating a full competition commission enquiry.
The test case originally commenced in July 2007 after it was discovered that banks and building societies were charging over £35 for a bounced cheque, standing order or direct debit.
Campaigners claim the actual cost incurred by the financial institutions could be as little as £2.
As a result, in July 2007, the OFT began a test case about unauthorised overdraft charges against Barclays, Clydesdale, HBOS, HSBC, Lloyds TSB, Royal Bank of Scotland, Santander and the Nationwide Building Society.
However, since the legal battle commenced, many of the major high street banks have already altered the structure of the fees they charge people who slip into the red.
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