Banks given leave to appeal on unfair charges ruling

Customers hoping to claim refunds from their banks for charges made on unauthorised overdrafts will have to wait to find out if they are entitled to any rebate.

Last month, in a case brought by the Office of Fair Trading (OFT), Mr Justice Andrew Smith ruled that it falls within the remit of the OFT to judge whether the fees charged by banks for unauthorised overdrafts are fair or not.

However, Mr Justice Smith suggested this week he is prepared to give the banks leave to appeal against his earlier ruling.

According to the OFT, banks generate some £3.5 billion of income from the fees charged to customers who overdraw without permission.

With thousands of customers suing the banks in the county courts for a rebate on the charges, the banks reached an agreement with the OFT on a High Court test case.

The test case was to decide on two issues: whether the OFT has jurisdiction under unfair contract rules to regulate the charges; and whether the actual charges are fair or not.

Now that the banks have permission to appeal against the ruling on the first issue, any moves on the second are bound to be delayed.

The OFT has been conducting an investigation into the question of overdraft fees since April 2007. At first the watchdog told the judge that it did not have a firm idea when the investigation would be completed but then indicated that it would be able to provide the banks with its preliminary findings by about mid-July.

The OFT said it was “committed to ensuring that the process moves forward as quickly as possible to resolution and is taking all necessary steps working together with the interested parties.”

It is thought that the banks’ appeal should be heard in the autumn. If, however, the matter is then taken to the House of Lords, no final judgment on the right of the OFT to rule on overdraft charges may be forthcoming until next year.

In the meantime, the thousands of county court claims from customers presently on hold will remain frozen until a decision is made.