Page last updated at 15:17 GMT, Thursday, 22 May 2008 16:17 UK

Deadline set on bank charges case

By Ian Pollock
Personal finance reporter, BBC News, High Court

Mr Justice Andrew Smith
Mr Justice Smith made his original ruling in April

A High Court hearing to decide the fairness of bank overdraft charges will now start before the end of the year.

The Office of Fair Trading and eight banks agreed the timetable under pressure from a High Court judge.

Earlier, Mr Justice Andrew Smith allowed the banks to appeal against his first ruling last month that the OFT has jurisdiction over the charges.

If that appeal is successful, then any separate decision on fairness would be made redundant.

Wait for customers

Last month's ruling by Mr Justice Smith was a victory for the OFT, which has been seeking legal confirmation that it can rule if bank charges are fair or not.

Consumers are still some way away from getting their money back
Chris Warner, Which? lawyer

The banks have been keen to oppose this to protect the estimated 3.5bn a year of income they generate from charging customers who go overdrawn without permission.

Under pressure from hundreds of thousands of customers suing them for the return of their overdraft charges in the county courts, banks agreed to a High Court test case in two stages.

The first was on the authority of the OFT under consumer contract regulations. The second will be on the fairness of the charges themselves, which the OFT has been investigating since April 2007.

"The judge has indicated he wants the OFT's investigation to be wrapped up quickly, and that is a very positive move for consumers waiting in the wings," said Chris Warner, a lawyer for the consumers' association Which?

"But the banks are appealing and it will be some time before a judgement is issued in that hearing and so consumers are still some way away from getting their money back."

Suggested dates

The banks' appeal is likely to be heard this autumn, but if either side then takes the issue to the House of Lords, the OFT's jurisdiction in the matter is unlikely to be settled until next year.

High Court in the Strand
The High Court has been the scene of the latest legal battle

Since the two sides first agreed this long process of litigation last July, tens of thousands of claims for the refund of bank charges have been frozen in the county courts.

Earlier in the course of the High Court case management conference, Mr Justice Smith expressed his discontent at the OFT's initial statement that it had no idea when its investigation would be completed.

"While the investigation is going on, we are asking the county courts to keep the litigation on hold," he said.

"How long are they expected to wait?"

Later, however, the OFT said it would share its initial findings with the banks in mid- to late July.

The regulator and the banks agreed that if they could not agree on a fair level of charges, the issue would go to the High Court before Christmas for a ruling.

For the time being, unresolved cases before the county courts and the Financial Ombudsman Service will stay on hold.

"I don't think this position should change," said the judge.

"The reasons that these actions should not proceed seem as strong as they were, and will remain so until any appeal by the banks is resolved," he added.

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