Bank charges case going to the House of Lords while some fear end to free current accounts

02 March 2009 / by Rachael Stiles
The banks are taking their appeal over the fairness of bank charges to the House of Lords.

Despite last week's High Court ruling which threw out the banks' appeal over a previous decision that bank charges

can be tested for fairness, the British Bankers Association has said that the banks "continue to believe that the Regulations do not apply to these type of charges."

They will be going to the House of Lords, the BBA said, for permission to appeal the Court of Appeal's decision.

"The banks will work with the OFT to ensure the next stages in the test case process are progressed as quickly as possible," it said in a statement yesterday.

David Kuo, from comparison website, has urged the banks not to take the appeal against the Office of Fair Trading any further, but to co-operate with the regulator in order to come to an amicable agreement.

"To pursue further legal action will only damage shareholder value, which in the case of Royal Bank of Scotland and Lloyds Banking Group is largely taxpayers' money," he said.

"Banks have done enough destruction already. It is now time to call it a day if they want to preserve any shred of dignity that remains."

But Kevin Mountford, head of banking at, is dubious about how much OFT will "kick the banks while they are down" by enforcing tough new reform during a recession if it does eventually emerge victorious from the test case.

"It will be interesting to see how much reform the OFT will be willing to push for." he commented.

"With so many banks in such a perilous state already, they could be rocked even further if they are forced to refund all customers - noting the level of pending claims."

He is also concerned that if the OFT does come down like a tonne of bricks on the banks this could have an adverse affect on the consumer in the form of an end to free banking.

Mr Mountford speculates: "If banks have to reduce penalty charges they are likely to introduce a regular charge on current accounts, thus mirroring the system used most consistently across the world."

David Black, principal consultant of banking at Defaqto, is also of the opinion that a successful result for the OFT could also mean swings and roundabouts for the consumer who will be able to start reclaiming bank charges but then give the money back in the form of current account charges.

"As always if the banks see a reduced income stream in one area they will undoubtedly seek to improve their lot elsewhere," he said. "Sadly I think we're getting a step closer to charges being introduced on full service current accounts."

Thousands of bank charges claims remain on hold in the courts while the banks and the Office of Fair Trading battle it out. Having been raking in up to £2.5billion a year from their customers, the banks stand to repay more than £20billion pounds if they lose.

Campaigners for an end to so-called unfair bank charges, sometimes as much as £35 for exceeding an authorised overdraft, urge consumers to put a claim in for the money as soon as possible to increase the pressure on the banks and to increase the speed of their claim if the OFT is successful.

© Fair Investment Company Ltd