Bank charges: Banks confirm 'unfair charges' appeal

Account providers to appeal ruling which opened the door for consumers to reclaim billions of pounds

Current account providers are to appeal a court ruling over overdraft charges that looked set to allow consumers to reclaim billions of pounds, it was confirmed today.

Last month, a high court judge ruled that the charges came under the Unfair Terms in Consumer Contracts Regulation 1999, following a test case between the Office of Fair Trading (OFT) and eight account providers.

The ruling opened the door for the OFT to challenge the controversial fees, which are charged when a customer goes over an agreed overdraft limit or a cheque or payment is bounced.

Consumers had hoped this would lead to a cap on the fees and allow them to reclaim excess charges paid over the past six years.

However, the case will now go to the court of appeal and it could be years before it is resolved.

In the meantime, customers' claims to have their charges refunded look set to remain on hold.

The consumer group Which? said the decision to appeal was a "kick in the teeth" for consumers.

"It'll be at least another year before people start to get their money back, during which time the banks will hit us with up to £3.5bn in overdraft charges," said the group's chief executive, Peter Vicary-Smith.

"The banks should do the right thing now, throw in the towel and start reimbursing the customers they've been overcharging all this time."

According to the OFT, banks earn up to £3.5bn a year in unauthorised overdraft fees - nearly £10m a day. They charge up to £39 for each bounced payment, when the actual cost may be as little as £2.

Before the test case was announced last summer more than 1m reclaim letters were downloaded from websites by consumers hoping to reclaim charges.

In some cases, customers were able to win back thousands of pounds from the banks, who refused to contest the claims in court. Banks are thought to have repaid around £500m so far.

Since last summer the Financial Services Authority has allowed all current account providers to put complaints over charges on hold.


Hilary Osborne

The GuardianTramp

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