Banks win in Supreme Court

Abbey National plc

Following on from the news this morning that the Supreme Court were set to make their decision over the banks vs the Office of Fair Trading, comes the news that the banks have won.

Millions of bank customers who were hoping to be refunded overdraft charges are set to be disappointed as they lose out over the Supreme Court judgement.

The court has overturned earlier court rulings that allowed the Office of Fair Trading (OFT) to investigate the fairness of charges for unauthorised overdrafts, the BBC states. The ruling means that the banks won't lose out on their estimated annual income of GBP£2.6 billion from charges.

The Supreme Court upheld the banks' argument that assessing the "unfairness" of overdraft charges is beyond the scope of the Office of Fair Trading (OFT), the consumer watchdog, which has been trying to use its powers to force banks to lower the penalties and repay the charges to customers, the British newspaper The Times states.

The ruling

Campaigners said they were shocked and disappointed with the decision.

Banks welcomed the ruling, said there had been major changes to current account packages recently, and pointed out that these unplanned overdraft fees could be avoided.

Seven banks and one building society wanted the court to overturn two previous rulings that said the OFT had the power to investigate unauthorised overdraft fees.Those challenging it were Santander, Barclays, Clydesdale, HBOS, HSBC, Lloyds TSB, Royal Bank of Scotland and Nationwide.

In explaining his ruling, the Supreme Court's president Lord Phillips said that bank customers agreed to pay overdraft charges as part of the price of having a current account, so they fell outside the scope of the appropriate regulations.

But Lord Phillips added that this was not the end of the matter as the OFT could still try to scrutinise bank charges under other parts of the regulations.

"This will not close the door on the OFT's investigations and may well not resolve the myriad cases that are currently stayed [put on hold] in which customers have challenged the relevant charges," he told the court.

The OFT are said to be very "disappointed" with the judgement and will now "consider the details of this judgment before it makes a decision on whether or not to continue its investigation into unarranged overdraft charging terms," it said in a statement

Banks

The British Bankers Association, which represents the banks, said it considered the decision as a "clarification of the law" rather than a victory.

"The banks will work with the regulators to ensure that the outstanding customer complaints are brought to a swift conclusion."

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