OFT defeat banks in High Court

Category: Banking
Date: 2/26/2009

Thousands of current account customers were given cause for celebration this morning, as the appeal by eight banks to overturn the ruling that the fairness of overdraft charges can be investigated was thrown out by the High Court.

The banks are not permitted to appeal the decision in the House of Lords and, as a result, the Office of Fair Trading (OFT) can now begin to look into the issue - welcome news for customers whose claims are currently on hold.

Many of the banks had already implemented changes to their penalty charges; some changing to tiering the charge levied depending on the cost of the item, while others have installed daily charges or lower, one-off fees.

Should the OFT force the banks to lower charges, however, the worry is that customers could see increased charges elsewhere, such as a move to levy an account fee. The penalties represent a significant revenue stream for the banks - Royal Bank of Scotland and NatWest can still charge £38 up to three times a day - something they can ill afford to lose in the current climate.