Today will see the start of a case which will eventually make a final decision about where the law stands on unauthorised bank charges. The Office of Fair Trading will commence proceedings in the High Court later today for a declaration on the law in respect to the issue of unfair fees enforced by banks on customers who break their contracts.
Since the OFT’s ruling last April that banks who charged more than administrative costs for things like exceeding an agreed overdraft limit or a bounced cheque, were acting unfairly, the County Courts and Financial Ombudsman Service have received thousands of complaints from unhappy consumers.
So far, most people have been compensated out of court, but earlier this month in a landmark case, a St Albans County Court judge ruled in favour of claimant Gregory terry in his case against Lloyds TSB, awarding him £4,050.
But still, the banks do not accept that the unfairness rules of the Unfair Terms in Consumer Contract Regulations apply. The OFT stands by its original ruling that these charges are unfair and wants to “establish this legal principle clearly in the court.”
In a statement, the OFT said “a quick determination of this point of principle will assist in securing a clear and orderly resolution of the fairness of these charges. The test case complements the ongoing market study into personal current accounts, which addresses wider questions about competition and price transparency in the provision of personal current accounts.
“The OFT will continue to work closely with the Financial Ombudsman Service and the Financial Services Authority, in addition to consulting with banks and consumer groups.”
In the meantime, market watchdog, the FSA has agreed that all existing or subsequent customer claims for refunds of bank charges will be recorded by the customer's bank or building society, but that any decision about potential refunds will be put on hold until the outcome of the court case.
If the case goes against the banks, it could cost them millions as more and more people are likely to challenge their own charges. In response to the case, British Bankers' Association (BBA) chief executive, Angela Knight said "The banks have always been firmly of the view that the fees they charge customers are fair and clear. The court case will clarify these points and provide certainty for customers and banks alike."
There has been speculation that lenders could end their free consumer bank accounts should the ruling go against them, but Ms Knight told the BBC that the BBA are "defenders of free banking," but that while she could not predict what the court case outcome would be, she added "we cannot say it will have no impact".
Find out more about reclaiming bank charges