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Abbey, Barclays, Clydesdale, HBOS, HSBC, Lloyds TSB, RBS and Nationwide to appeal against 'unfair' bank charges

28 October 2008 / by Rachael Stiles
The High Court appeal of the UK banks that are contesting the right of the Office of Fair Trading to determine the fairness of overdraft bank charges will begin today.

Earlier this year, the OFT won the first stage of the High Court test case on bank charges when Mr Justice Andrew Smith said that the consumer regulator could determine the fairness of the charges, but the banks involved in the case quickly launched an appeal against the ruling.

Abbey, Barclays, Clydesdale Bank, HBOS, HSBC bank, Lloyds TSB, RBS and Nationwide Building Society will be arguing that consumer contract regulations do not give the OFT sufficient power to decide whether 'unfair' bank charges are indeed unfair or not.

Before the Financial Services Authority put a freeze on reclaiming bank charges until the matter is clarified by the courts, thousands of current account customers had already claimed back millions of pounds, and consumers stand to claim back millions more if the OFT is successful.

The banks have reportedly been generating more than £2million a year from the charges – incurred when a customer exceeds their overdraft limit or bounces a cheque or direct debit – so they stand to lose out significantly if their appeal is unsuccessful.

On the other hand, if the banks emerge the victors in this latest round of the test case, then the tens of thousands of bank charge cases which are currently in limbo in county courts will be thrown out.


Consumer groups and customers have been claiming for several years that the charges – often as much as £35 each time – are disproportionate to the actual cost incurred by the bank when a customer goes outside the terms and conditions of their account, estimated to be about £2.

Customers have found themselves going outside of their overdraft limits and then having difficulty getting back in the black again as the charges add up faster than they can pay them.

The British Bankers' Association has said that "The banks are appealing on this issue as they continue to believe that unarranged overdraft charges are fair and that the fairness test in the UTCCRs [Unfair Terms in Consumer Contract Regulations Act, 1999] does not apply to these types of charges."

The banks won a victory earlier this month when Justice Andrew Smith said that under common law, bank charges are not generally unfair penalties, thus defeating one of the OFT's arguments against bank charges.

Consumer watchdog Which? believes that the ongoing test case is piling yet more pressure on consumers already feeling the pinch of the credit crunch. "It's extremely disappointing that instead of looking for ways to make their customers' lives easier during these difficult times, the banks are piling on the misery by continuing to hit them with unfairly high unauthorised overdraft fees." said Which? chief executive, Peter Vicary-Smith.

"The banks should not be appealing the High Court's decision. They should be working with the OFT to establish what constitutes a fair unauthorised overdraft charge and starting the process of refunding the customers they have been overcharging for years."

© Fair Investment Company Ltd