Banks consider test case to fight back against charges revolt

Banks consider test case to fight back against charges revolt

High street banks are considering taking a legal test case to resolve ambiguities over customer claims for repayment of thousands of pounds in "unfair" bank charges. Industry sources suggest the banks are finally listening to pleas by judges who want the matter dealt with by the high court to clarify the law.

Bankers have been debating how best to resolve the uncertainty surrounding payment of claims for charges levied on unauthorised overdrafts, which campaigners estimate run to £4.7bn a year. They have been discussing whether the answer can be provided by the courts or whether they should wait for the outcome of a competition investigation.

Thousands of customers have been reclaiming charges going back six years on the grounds that they bear no relation to the bank's costs and are illegal. Banks have largely settled out of court rather than reveal the actual cost of overdrafts and bounced cheques.

The situation has been thrown into confusion by the decision by the Office of Fair Trading to investigate bank charges. A court ruling last month in which Lloyds TSB became the first bank to successfully defend a customer's claim in court, further muddied the waters. In that case, a judge at Birmingham county court dismissed a claim on the basis that the charges were legitimate fees for serving an overdrawn account. His decision is being used by some banks to deter customers from putting in claims.

Banks have been reluctant to admit how.....continued below

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far they are being affected by customers reclaiming charges, but Barclays and HSBC revealed last week that their profits might be hit as a result of the customer revolt. Other banks are expected to make similar admissions in trading updates.

Some bankers believe the OFT investigation, which is expected to report at the end of the year, will not provide the solution and a test case may be the only way to tackle the issues.

The calls for a test case have been made on a number of occasions. After 77 cases were listed to be heard at Leeds mercantile court and then all settled out of court, Judge Roger Kaye said a decision needed to be taken at high court level to clarify the situation.

Judge Paul Collins, speaking on behalf of county court judges in London, has also said it would be "very desirable" to have a test case.

It now seems more likely that the banks will agree such a case.

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