Lloyds TSB has become the first bank to defeat a court challenge by a current account customer over unauthorised overdraft penalty fees.
A district judge at Birmingham County Court dismissed a claim for more than £2,000 in fees and interest on the grounds that charges levied by the bank were a legitimate part of the service.
The verdict will come as a blow to thousands of people still hoping to reclaim ‘unfair’ charges from their bank.
But campaigners noted that the ruling was made by a district judge and as such was not binding in the way that a High Court judgment would be.
Fees and interest
The case involved a claim for £1982.37 in fees and additional interest made by Lloyds TSB customer Kevin Berwick.
Mr Berwick argued that Lloyds TSB’s charges for going over an agreed overdraft limit were unreasonably high – sometimes up to £30 – and as such he should be reimbursed for money taken from his account in relation to them.
In filing the claim, Mr Berwick’s actions were in line with thousands of UK bank customers who have successfully claimed against their current account provider – usually without the matter coming to court.
But unlike most other cases, Lloyds TSB were unable to reach a settlement out of court after Mr Berwick refused their offer, giving a judge the opportunity to rule on the legality of charges for possibly the first time.
District Judge Cook said that Mr Berwick failed to satisfy the court that he had any ground in law to recover the charges, and dismissed the claim.
In a written verdict Judge Cook said: ‘There is no evidence before me from which I could conclude that, taking into account the other elements of the service provided by the banks without charge, these particular charges were unreasonable.’
He added that having established that the fees were not charges for breach of contract but part of the price of the service provided by the bank, he was unable to rule that they were unfair.
Mr Berwick is believed to be considering an appeal against the verdict.
In a statement, Lloyds TSB said: ‘We are pleased with Judge Cook’s ruling as it appears to acknowledge our position in respect of current account service charges.
‘The court has agreed with us that these are charges for a service and not default or penalty fees, as has been argued by others.’
Which? personal finance campaigner, Emma Bandey, says: ‘People should not let this decision put them off reclaiming their bank charges. This was a county court ruling and does not set a precedent.
‘Anyone claiming back unauthorised overdraft charges should refer their case to the Financial Ombudsman Service (FOS) if either their bank refuses to refund the charges or the bank fails to resolve the issue within eight weeks of receiving the complaint. It’s a free service and so far the banks have chosen to settle all cases that have been referred to FOS.’
Thousands of people have already successfully reclaimed their penalty charges by using the template letters and step by step guide at www.which.co.uk/bankcharges.