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Bank charges verdict – Banks' appeal allowed

25 November 2009 / by Rebecca Sargent

The Supreme Court has found in favour of the banks' appeal in the ongoing bank charges test case.

The news will come as a blow for millions of consumers, and overturns previous decisions made by the Court of Appeal and House of Lords which ruled that the Office of Fair Trading could use fairness rules to assess bank charges.

Reasons given for the bank charges judgement include the fact that the bank charges in question are not 'concealed default charges designed to discourage customers from becoming overdrawn on their accounts without prior arrangement.'

Other comments made include the fact that in absence of charges, the banks would not be able to profitably provide current account services without a fee. In fact, Lord Phillips stated that:

"It might be open to question whether it is fair to subsidise some customers whose accounts always remain in credit by levies on others who experienced events they did not foresee when they opened their accounts."

Commenting, Martin Lewis, creator of Moneysavingexpert.com said:

"Today's decision is a shock and disaster for millions of consumers waiting to get their charges back.

"We are now left in a perverse situation that bank accounts must be fair when in credit, because FSA regulations cover that, but not when overdrawn, so the most dangerous bit of banking is now the one where we have the least rights."

It is expected that the OFT will continue to push for fairness rules to apply to bank charges, despite today's ruling, which stated that the OFT can still assess the fairness of bank charges, but under different grounds to those it had hoped for.

Commenting, Kevin Mountford, head of banking at moneysupermarket.com said: "It is unlikely to be the end of the story and no doubt many customers will be left confused by today's ruling. 

"We expect the OFT to continue to try and press for a system where the costs of running the current account system are spread more fairly across all customers. In truth banks have already started to respond to this - for example we've already seen a big move from banks towards so-called packaged accounts where you pay a monthly fee but get added benefits such as travel insurance thrown in. We expect this trend to continue and in return for fairer overdraft charges banks could introduce transaction fees, or monthly and annual fees."

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