Bank claims may resume in courts

By Ian Pollock
Personal finance reporter, BBC News

International Dispute Resolution Centre, where the case is underway

Banks could be back on trial over the return of overdraft charges this week, the High Court has been told.

Many county court judges had agreed to suspend cases last summer until a final judgement on whether the charges were fair was made in a test case.

But Mr Iain Milligan QC, for Barclays bank, told the test case hearing that thousands of cases were scheduled to automatically resume this week.

The hearing is likely to end soon but a final judgement could be a while yet.

Mr Justice Andrew Smith said he will consider making a recommendation on the matter, but has said that a recommendation would have to be "even handed".

Common problem

District and county court judges were told they could temporarily halt any current or pending cases - and those still in the pipeline with the Financial Ombudsman Service (FOS) - until the High Court made a final judgement.

This was part and parcel of the deal in which the Office of Fair Trading (OFT) and the UK's main banks agreed to stage the High Court test case which started last month.

The aim is to clarify if the OFT has the power, under the 1999 Unfair Terms in Consumer Contracts regulations, to decide that bank overdraft charges are unfair.

Mr Milligan told the High Court that the automatic lifting of the stays was a "common problem" for all the seven banks and the Nationwide building society involved in the test case.

They face the prospect of having to respond if tens of thousands of customers write to county court judges trying to revive their claims and asking for summary judgement in their favour if their banks do not respond.

Consumer litigants

The past two years have seen hundreds of thousands of people use the county courts and the FOS to reclaim overdraft charges, claiming they are illegal under the regulations or that they are unfair penalties under common law.

It would be very good news if the right to justice was returned to ordinary consumer litigants Marc Gander, CAG

The banks have denied that there is anything wrong with their charges, pointing out that they are clearly stated in their contracts with their customers.

But rather than risk losing a case in a county court the banks have settled without admitting any liability in almost all cases, an approach that saw them hand back more than half a billion pounds to customers in the first half of last year.

Eventually the deluge of claims forced them to seek a legal resolution.

Marc Gander, of the Consumer Action Group (CAG) which has been at the forefront of the campaign against bank charges, urged the Judge not to do anything to reinstate the stays.

"We would be extremely pleased if the stays were lifted," he said.

"It would be very good news if the right to justice was returned to ordinary consumer litigants," he added.

Language

Earlier, on the 12th day of the hearing, the court was told that bank contracts with their customers did not fall foul of the requirement that they should be in "plain and intelligible" language.

Mr Justice Andrew Smith expects the case to end this week

Mr Robin Dicker QC, for HBOS, said that bank contracts were obliged simply to avoid being obscure or ambiguous.

"Terms [in contracts] have to be straightforward and clear," he said.

Mr Dicker took the judge through the 1993 European directive which had led to the introduction of the current regulations.

"There is no hint that suppliers have to give consumers all details or facts, or advise them how the contracts may operate in the future," he said.

As part of its case the OFT has asked the judge to rule that bank contracts are not in plain English, so that it can investigate them.