By Ian Pollock
Personal finance reporter, BBC News
Many customers are waiting to see if the test case goes their way
The UK's banks repaid more than three-quarters of a billion pounds in 2007 to customers who sued for the return of their overdraft charges.
And the BBC's estimates suggest they may also have avoided repaying as much as £1.37bn due to a legal stay on new and current claims because of a court case.
The calculations are derived from the figures published in the annual results of the five major banks, the last of which was released on Monday.
The issue of overdraft fees has been hugely controversial.
One year ago, UK banks were besieged by several hundred thousand disgruntled customers, who had lodged claims in the country courts and with the Financial Ombudsman Service (FOS) stating that the banks' overdraft fees were unfair and illegal.
But a stay on payments was put in place when the banks and the Office of Fair Trading (OFT) agreed last July to a High Court test case on the rules governing the fees.
The first judgement in the case is expected in the coming months.
With the banks' annual reporting season now over, they have now revealed just how much they were forced to pay out last year.
The sums revealed in the past few weeks come to this:
- Lloyds TSB - £76m
- Barclays - £116m
- HBOS - £122m
- RBS Natwest - £119m
- HSBC - £116m
That adds up to £549m for the big five high street operators alone.
The big five are reckoned by the British Bankers' Association (BBA) to hold about 70% of the UK's current accounts.
Assuming that other banks and building societies, such as the Abbey and the Nationwide, paid out similar sums in relation to their size, then it is likely that all the UK's banks together paid out £784m in the course of 2007.
The interesting fact here is that a large chunk of that - about 35% - came in the second half of the year.
And that was due mainly to payments made in July alone, before the legal stay on further cases was implemented.
If the volume of cases going through the courts and the FOS had continued in 2007 at the same rate as in July, and if the level of payments made to the claimants had also been sustained, then the banks would have paid out much more money.
The July payout, at 35% of the estimated 2007 total, would have been £274m.
There were another five months left of the year after the stay came into effect.
So, if the banks had continued to pay out at the same rate for the remaining five months of the year, then a further £1.37bn would have been paid by the banks, but for the legal stay.
Add that to the £784m estimated to have been paid out last year, and it seems the industry might have been faced with paying out £2.154bn for the whole of 2007.
The British Bankers Association (BBA) declined to support this analysis.
"There are no authoritative figures for the numbers of claims settled in July or any other month last year, so there can be no clear evidence of any trend," said a spokesman.
July might have been a peak that would have tailed off as the year went on, leaving the banks with much lower demands for refunds.
But Marc Gander of the Consumer Action Group (CAG), a leading campaign against overdraft charges, thinks not.
"It's our impression that the claims were really building up," he said.
"It helps to explain why the banks were happy to agree to the test case."
The banks are still saying very little about the number of people they have refunded, or how much they stand to lose if the court case, and any subsequent appeals, goes against them.
Nor will they reveal how many claimants are still in the legal pipeline.
But the CAG records that 9,435 members and sympathisers have so far retrieved charges amounting to £19,590,585, making an average payment of £2,076.
Divide last year's estimated payout of £784m by that sum, and it suggests that nearly 378,000 customers have been refunded some money by their banks.
The likelihood that more payouts have been stymied by the legal stay infuriates campaigners such as Martin Lewis of Moneysavingexpert.com.
"I find it staggering that the Financial Service's Authority's justification for the hold on cases was to protect consumers," he said.
"The big industry of finance has lent on the big institutions of state and together they have squashed consumers," he added.
This was disputed by the BBA.
"It is important to remember that customers can still register claims and that banks can still make goodwill gestures where there are special financial circumstances, or where customers are in significant financial hardship," said a spokesman.
"Meanwhile all parties to the current court case agree existing claims need to be on hold until we receive a clear legal position, so that everyone involved is treated equally and fairly."
In their annual results, all the banks have stated that they believe their overdraft charges are fair and legal.
The lone bank to make an estimate of any further damage to its finances is HSBC.
"If, contrary to HSBC Bank plc's current assessment, the Court should ultimately (after appeals) reach a decision adverse to HSBC Bank plc that results in liability for it, a large number of different outcomes is possible, each of which would have a different financial impact," it said.
"Based on the facts currently available to it, and a number of assumptions, HSBC Bank plc estimates that the financial impact could be approximately $600 million."
The bank explained that this was an estimate of retrospective liability, going back six years to July 2001.
But it warned: "To make an estimate of the potential financial impact at this stage with any precision is extremely difficult, owing to (among other things) the complexity of the issues, the number of permutations of possible outcomes, and the early stage of the proceedings."