The Office of Fair Trading has announced this morning that it will not be pursuing its test case on bank charges following its defeat in the Supreme Court.
The OFT admits that "low prospects of success", were it to continue to pursue the test case in light of the recent set back, mean that it is not viable to continue.
Last month the Supreme Court found that bank charges for unarranged overdrafts could were not subject to Unfair Terms in Consumer Contract Regulations 1999, as the OFT had hoped they would be.
But the OFT still intents to pursue change in the current account and overdraft charges system; it believes that the banks are generating around a third of their personal current account revenue from overdraft charges which are "difficult to understand, not transparent and not subject to effective consumer control."
John Fingleton, chief executive of the OFT, said that the Supreme Court judgement was "disappointing" for many consumers.
"We are committed to securing significant changes to unarranged overdraft charges going forward," Mr Fingleton said, adding that "Customers can play their part by looking for value for money and switching accounts if necessary."
Many customers were already reclaiming bank charges before the test case began in 2007, until the Financial Services Authority put a freeze on claims until the matter was clarified by law, unless the customer was deemed to be in financial difficulty.
The British Bankers' Association said that the banks "welcome today's announcement by the OFT that it is ending its investigation into the fairness of overdraft charges." But, it will continue to work with the OFT to deal with any concerns which it has regarding the current account market.
Already, it said, the banks have "launched a range of new overdraft pricing models," helping consumers to "consider the costs of running their account, shop around for a wider range of product prices to get an account that works for them and switch provider more easily if they find an account which is better for them."
Kevin Mountford, head of banking at price comparison website moneysupermarket.com said he was unsurprised by the OFT's decision, calling it 'inevitable'.
But while it is disappointing for consumers, the lengthy test case has not been for nothing, he said, as "in truth the OFT's campaign has actually forced the banks to cut their charges already, so millions of customers will be better off in future."
"There are a range of highly competitive current accounts on the market and the switching process is easy, with most of the major banks now having dedicated switching services to do most of the hard work. We urge the regulators to turn their attention to improving the switching process still further to facilitate customers voting with their feet."
Martin Lewis, founder of MoneySavingExpert.com, believes it is still worth consumers sending in a claim, crossing their fingers and hoping for the best.
© Fair Investment Company Ltd
