Banks to appeal 'unfair charges' rulingWhich? says it's a kick in the teeth for consumers

23 May 2008

Coins and bank notes

The decision by Britain’s high street banks to appeal last month’s landmark judgement on unauthorised overdraft fees is ‘kick in the teeth for consumers’, Which? says today.

The seven banks plus one building society were granted leave to appeal at the High Court yesterday by Mr Justice Andrew Smith.

It follows his ruling last month that charges levied by banks for unauthorised overdrafts are subject to ‘unfair contract’ regulations.

The ruling had opened the way for an Office of Fair Trading (OFT) investigation into whether the charges are actually unfair.

Court of Appeal

But the appeal by the banks means the case will now go to the Court of Appeal - to be heard sometime between October and December this year - and then possibly to the House of Lords before a final decision is made.

Which? chief executive Peter Vicary-Smith said: ‘This is a real kick in the teeth for consumers as it just drags out the whole process.

‘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 £3.5 billion in overdraft charges.

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

It’s estimated that banks make between £2bn and £3.5bn a year in unauthorised overdraft charges.

Customer refunds

You incur these charges if you go into the red and the bank hasn't authorised this, or if you breach your authorised limit. On top, you can end up forking out when, for example, the bank bounces a cheque - which can cost up to £38.

Refund claims for the charges have been frozen since last July when the OFT and the banks agreed to resolve the issue in a test case.

Customers' county court claims are likely to remain on hold until after any appeal is heard, meaning any refunds for consumers could be some time away.

Annual results for the major high street banks show they have so far paid out more than £559 million in refunds to customers who complained about unauthorised overdraft charges.

It's estimated that banks could collectively face a bill of more than £1.1 billion from the issue.