Today marks the fourth day of the OFT test case into the legality of bank charges
, and personal finance and advice website financedaily.co.uk is warning that if the banks lose, it could mean bad news for consumers.
The OFT's court case against eight leading banks - Abbey, Barclays, Clydesdale Bank, HBOS, HSBC, Lloyds TSB, Nationwide and the Royal Bank of Scotland Group – into unfair bank charges has been a hot topic since it began on January 17.
The aim of the case is to determine the legality of the charges – sometimes up to £40 –by banks and building societies to their customers for things like going over an agreed overdraft limit or a bounced cheque.
In April 2006, the OFT slammed these sorts of charges, stating that a bank charge, although legal, should only cover "limited administration costs", and that a charge of up to £40 for exceeding an overdraft could not be justified.
But the banks stood by the charges, with British Bankers' Association chief executive, Angela Knight, saying at the time: "The banks have always been firmly of the view that the fees they charge customers are fair and clear," so the OFT decided to take the big eight to court for a legal ruling.
But now experts are warning that although a victory for the OFT would in theory be a victory for the consumer, it could actually be a doubled edged sword.
"If the banks lose the case it will almost certainly be the end to ‘free’ banking in the UK because the banks will have to find alternative ways of earning money back from customers," said Dale Lovell, Editor of FinanceDaily.co.uk.
Lovell says that interest paid by banks on current accounts will more than likely end and be replaced by monthly standing charges; "if the banks lose this case we will go from a position of free current accounts to being charged for current accounts," he continued.
"While those who have suffered under unfair penalties will view victory as a good thing, in the end if the banks lose, it will effectively mean that the majority of bank customers, who manage their bank accounts properly without going into debt, will end up paying for those customers who get into financial difficulty."
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