The consumer campaign against bank charges stirred up "a hornets' nest", a barrister has told the High Court as a long-awaited test case got under way.
Laurence Rabinowitz QC is defending the Royal Bank of Scotland Group, one of eight lenders that have been accused of levying unfair overdraft fees.
The Office of Fair Trading (OFT) wants the court to rule that it can challenge the disputed current-account charges.
The firms reject the OFT's claim that the fees are unfair under consumer law.
The outcome of the case could bring a fundamental change to UK High Street banking.
If the OFT argument is upheld it could mean banks and building societies having to return billions of pounds in charges collected from customers over the past six years.
Some industry experts have warned it could mean the end of free banking.
'Torrent' of claims
Seven banks and the Nationwide building society agreed to the test case to clarify the legal position after a mass of litigation which has seen hundreds of thousands of consumers claim refunds running into hundreds of millions of pounds.
"A hornets' nest had been disturbed and something had to be done"
"The background to the case is the torrent of claims lodged in the county courts and the deluge of complaints to the Financial Ombudsman Service," said Mr Rabinowitz.
The barrister said the OFT was itself partly responsible for the scale of the consumer revolt after "ill-informed" comments it made after an earlier ruling on the unfairness of credit card charges in 2006.
He argued the OFT's statement at the time which claimed that the same principles applied to current accounts was "unfortunate", since it was made before the regulator had even started its formal investigation into overdraft charges.
"A hornets' nest had been disturbed," he told Mr Justice Andrew Smith, "and something had to be done."
Price control
The main area of legal argument is about the application of the 1999 regulations that govern unfair terms in consumer contracts.
BANK REFUNDS IN 2007
The OFT believes these give it the authority to decide if bank overdraft charges are unfair and too high.
The eight lenders, who provide about 90% of all current accounts in the UK, deny this.
They say the regulations cannot be applied to the price they charge for offering an overdraft facility, or to the core terms of the current account service they give their customers.
"The regulations are not a mechanism of price control - but the OFT thinks they are," Mr Rabinowitz said.
Long hearing
Both sides have submitted in advance their basic arguments to the judge.
The civil hearing will not involve witnesses giving evidence or cross-examination.
But with each bank expected to take up to two days each to submit its arguments in detail, the hearing is likely to last for several weeks, longer than the eight days originally anticipated.
The High Court judge hearing the case, Mr Justice Andrew Smith was called to the bar in 1974, and appointed a QC in 1990.
He was made a High Court judge in the Queen's Bench Division in 2000, and was the Presiding Judge of the North Eastern Circuit from 2003 until 2006.
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