Page last updated at 15:49 GMT, Wednesday, 25 November 2009

Q&A: Overdraft charges and your claims

Bank statement showing overdraft charges
The case will have an impact on many thousands of claims

The UK's banks have won a significant victory against attempts to have their overdraft fees ruled unfair.

The Supreme Court has decided that the Office of Fair Trading (OFT) does not have the powers it thought it had to scrutinise the fairness of bank charges.

However, there are still more than a million refund claims on hold at the banks, in the county courts and at the Financial Ombudsman Service.

So what happens now?

A lot of official bodies have a finger in this particular pie and right now they are considering what to do next.

"We are not sure," said a spokeswoman for the defeated OFT.

However, the Treasury is leaning heavily on the banks to come to some sort of deal with the OFT as far as future charges are concerned.

"We are focusing on a fairer system for the future," said a Treasury spokesman.

"The OFT is in talks with the banks to see a fairer and more transparent and reasonable system of charges.

"We are aiming for a voluntary agreement - 'You need to reach agreement soon' is the message," he added.

What could the OFT do now?

It says it will make a formal announcement next month on what it plans to do next.

Apart from negotiations with the banks, it could abandon its current enquiries into the actual fairness of bank charges and give up.

Or it could publish its detailed conclusions anyway, and possibly devise another legal attack on the way banks levy overdraft fees.

The Supreme Court said the OFT could have another go, if it wished, using another section of the Unfair Terms in Consumer Contracts Regulations.

Regulation 5 talks of taking action if there is a "significant imbalance in the parties rights and obligations arising under contract to the detriment of the consumer".

The OFT may not have the heart to go through the issues all over again, but under a different heading.

It did mention at the Law Lords appeal during the summer the possibility of triggering a full-scale competition enquiry into the banks if it lost the test case.

But that would also be a very long-winded affair, quite possibly stretching over several years.

My claim is frozen, what is going to happen to it?

The FSA says banks must now start processing all the complaints that have been put on hold for the past two and a half years.

The British Bankers' Association says banks will deal with them "in an orderly fashion".

"Each individual bank needs to deal with each individual complaint," said a BBA spokesman.

Lord Phillips said the Supreme Court's judgement "may well not resolve the myriad cases that are currently stayed in which customers have challenged relevant charges".

Later the Judicial Communications Office said that each case would be considered on its merits by County Court judges.

The brutal truth though seems to be that the claims for refunds of past charges, whether at the banks, in the courts or with the Financial Ombudsman Service (FOS) are dead in the water.

"That is the end of it," a barrister who specialises in banking told the BBC.

"All these actions will be struck out - there is no basis for them as currently constituted."

What if my bank has already paid?

Before the mountain of claims started, a number of banks paid claimants instead of going through with county court cases.

However, these were "goodwill gestures". This means that, if you have received one of these payments, you do not need to pay that money back.

The chances of getting a refund if yours is one of the cases on hold now seems extremely slim.

Can my bank still charge me?

Yes, if you go overdrawn without permission, your bank can still charge you a fee - and it can also set the price.

However, some change is in the wind.

Banks have started to compete on how customers are charged.

Earlier this month, Santander said it was planning a new "fee-free" account available to its mortgage customers. This will not charge for unauthorised overdrafts or make a levy on payments that bounce or withdrawals overseas.

Prime Minister Gordon Brown said that government-supported banks - Northern Rock, HBOS and RBS - had recently been asked to review their overdraft charges so that they were fairer to customers.

In October, RBS-NatWest broke ranks with the rest of the industry by slashing its overdraft charges.

However, if any banks lower charges for unauthorised overdrafts, this income might need to be made up elsewhere - and that could include customers who do not go into the red without permission.

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