Bank charges victory for consumers as banks lose appeal

26 February 2009 / by Rachael Stiles
In another victory for the consumer, the banks have failed in their appeal to revert a decision by the High Courts which gives the Office of Fair Trading the right to decide on a fair bank charges fee.

The High Court rejected the appeal from current account providers that bank charges cannot be tested under the Unfair Terms in Consumer Contracts Regulation of 1999.

The OFT could now rule that banks have to stop charging so much when a customer goes outside the terms and conditions of their current account, and that the banks have to repay millions of pounds to their customers.

Consumer groups have spent the last several years fighting the bank charges which the OFT has deemed 'unfair'. Sometimes hitting account holders with a fee as high as £39 every time they exceed their overdraft or bounce a cheque, banks have reportedly been raking in profits of £3.5billion a year from their customers.

The test case was initiated by the OFT and a number of current account providers – Abbey, Barclays, Lloyds TSB, Nationwide Building Society, Clydesdale Bank, HBOS, RBS and NatWest – to provide clarity and consistency on the issue of bank charges.

Thousands of people have already reclaimed their money, but some were receiving full refunds (including interest lost) after making a claim, while others were refused a refund, or were refunded but then had their bank account closed by their provider.

As a consequence of these inconsistencies, in 2007 the Financial Services Authority put a freeze on bank charges until the matter is clarified by law – people can still put their claim in but the banks do not have to process them. In the meantime, thousands upon thousands of claims sit in small claims courts, awaiting a result of the test case.

While consumers will not immediately be able to reclaim what the OFT can now determine are 'unfair' bank charges, this is being seen as an important victory for the consumer.

James Caldwell, director at, said of the announcement about the banks' appeal:

"This is a very positive step in the right direction for the campaign against bank charges. The banks have been taking millions of pounds from their customers for years, sending many people into debt to the tune of much higher figures than the amount they went overdrawn by in the first place.

"Today's announcement means that consumers are edging closer towards being able to claim back their money – people shouldn't waste any time getting their claim in, as this will put added pressure on the banks to give their customers back what is rightfully theirs and might mean you get your money back faster if the OFT is successful and ultimately wins the test case."

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