Overdraft ruling favours banks
9 October 2008 In the latest stage of a complex legal battle over the fairness of overdraft charges, the judge assessing the case has issued a ruling in favour of the banks. The series of legal hearings, brought as a result of an agreement between the banks and the Office of Fair Trading (OFT) to go to court in a test case, has centred on the fairness of charges on unauthorised overdrafts and whether the OFT has the right to rule if the fees are proportionate or not. The presiding judge, Mr Justice Andrew Smith, has now said that bank customers cannot use common law to contest the level of charges levied by banks between 2001 and 2007. The ruling comes after a three-day hearing in July. His decision will have an effect on many county court claims for compensation, lodged by customers against the banks for refunds of charges but frozen for the duration of the hearings. Mr Justice Smith ruled that historic bank terms and conditions cannot be disputed as unfair penalties under common law. However, while clearing a number of banks from common law challenges by customers, the judge said that the terms and conditions of a few still required clarification. He also indicated that, despite the common law ruling, the OFT has the power to investigate overdraft fees under the Unfair Terms in Consumer Contracts regulations 1999. Angela Knight, chief executive of the British Bankers Association, said: “The question of penalties was one of the claims made by the OFT which triggered the initial court case. Now we have had this judgement we are keen to move on to the next stage as quickly as possible.” An OFT spokesman said: “This is another staging post in a complex legal process. We are progressing our investigation as quickly as possible and are in continuing discussion with the banks about our provisional views on the issue of fairness.” There promise to be further court hearings, including an appeal by the banks over a High Court judgement in April supporting the OFT’s right to examine overdraft fees, before any final outcome on customer claims for refunds will be reached.
|