On 24th April the High Court ruled that the charges made by banks for going into the red or not having funds to pay a cheque or direct debit are bound by standard legal rules on the fairness of contracts.

This will probably mean that banks will lose the right to charge as much as they want when a customer transgresses the terms of his/her account. High Street banks had previously insisted that such charges were at their discretion, and some institutions charged as much as £38 for each incidence.

The OFT (Office of Fair Trading), which brought the case, is now expected to proceed with a case to prove that the charges are, in fact, unfair.

If this case is successful, then it is possible that banks may be forced to reimburse customer charges going back years, costing them billions of pounds, and giving millions of customers a windfall.

Although consumer groups have hailed the decision as “a massive victory”, the banks have hinted that they might appeal against the ruling. The banks defending the case (Abbey, Barclays, Clydesdale, Halifax Bank of Scotland, HSBC, Lloyds TSB, Royal Bank of Scotland and the Nationwide Building Society) had put together a large and costly legal team - one of the biggest seen for a commercial case.

In the meantime, current pending claims of over £700 million are on hold until the final outcome of the case is known.

This entry was posted on Monday, April 28th, 2008 at 12:22 pm and is filed under Bank Charges. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.