Banks may challenge charges case

The High Court will be told if the banks wish to appeal

The UK's banks seem likely to appeal against a recent High Court ruling that the Office of Fair Trading (OFT) can scrutinise their overdraft charges.

An appeal by seven banks and the Nationwide building society is "under active consideration", a banking source told the BBC.

At stake is the estimated £3.5bn which the banks raise each year by charging customers for unauthorised overdrafts.

An appeal would probably see the issue being dragged out into next year.

The banks will make their decision known at a case management conference at the High Court in London on Thursday.

Disgruntled

After the first round of High Court hearings earlier this year, Mr Justice Andrew Smith ruled in April that the OFT had the power, under the 1999 Unfair Terms in Consumer Contract Regulations, to decide if bank overdraft fees were fair.

The issue has seen hundreds of thousands of disgruntled bank customers in the past two years trying to sue their banks in county courts or using the Financial Ombudsman Service (FOS) to get their money back.

In some cases, bank charges have led to customers being charged more than £30 each time they go overdrawn without permission or have a cheque bounced.

The OFT launched a formal investigation into the fairness of overdraft charges last April and although it has not announced its conclusion, it clearly believes that the scale and structure of bank overdraft charges are unfair.

On hold

Fresh cases have been frozen since last July, when the litigation between the OFT and the banks first agreed that the courts should resolve the issue.

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The banks have refused to reveal how many customers claims are on hold in either the court system or at the FOS, but the figure is likely to run into the tens of thousands.

Kelly Goode from Plymouth told the BBC she first claimed against the NatWest last year and feared she might have to wait another year.

"I have been waiting for a result since last February and think it's stupid to be taking this long for a result," she said.

If the banks do appeal, the issue of the regulator's jurisdiction will go to the Appeal Court and then quite possibly the Houses of Lords before a final decision is reached.

The banks are likely to seek permission to appeal by arguing that the original decision was of limited binding authority, that the issue is of substantial public interest and possibly that the judge got the law wrong.

The banks will then have a further 21 days to submit the precise legal grounds of their appeal.

The OFT could also appeal, since Mr Justice Smith rejected its claims that bank charges were also unfair penalties under common law, and that the banks' terms and conditions were not in "plain and intelligible language".

Second stage

Mr Justice Smith will also have other important issues to decide.

Both sides in the case will want to know how his ruling, which focused on the banks' current customer contracts, applies to the many claims that have been made under old terms and conditions.

And they will seek guidance on how they should proceed to the second stage of the litigation, which will address the central issue of whether or not the bank's charges are fair or not.

However, this stage may be delayed by any appeal on the OFT's jurisdiction in the matter.

If that happens, the banks are likely to face criticism that they are simply stalling, contrary to their publicly stated desire to resolve the legal status of the charges as quickly as possible.

Dave Sheldon from Cardiff said he wanted to pursue his claims against the NatWest, Halifax and Bank of Scotland, which have been on hold since last summer.

"The banks are certainly just stalling as there is no way the charges that they make can be justified and they know it," he said.

"Why can't they just be thankful for all the years they ripped everyone off and made billions and admit it?"