The Office of Fair Trading has won its High Court claim that charges levied by banks for unauthorised overdrafts are subject to "unfair contract" rules. The decision paves the way for another hearing in which the court will decide whether the charges are unfair and, if so, what they should be.
It could result in banks and building societies having to pay back billions to customers.
The test case was brought jointly by the OFT together with seven high street banks and the Nationwide building society, following moves by customers to reclaim millions of pounds in charges through the courts.
The OFT argued the charges for unauthorised or excessive overdrafts amount to penalties, which is against consumer regulations. But the banks countered they are not penalties but fees for a service, namely setting up an overdraft, and as such are not unfair.
The charges are incurred when customers get overdrawn without an agreement or breach their authorised limit. Banks are thought to have made between £2bn and £3.5bn a year in such overdraft fees for the last six years.
They can be as much as £35 for a bounced cheque, although campaigners claim the cost to the banks could be as little as £2.50.
I think it is unfair for banks to charge when in my case a direct debtit came out of my account 2 days early, when I questioned this with the bank I was told it was not their fault and I would be charged £35. It wouldn't have been so bad but they didn't even let the direct debit go through when they know that I had money going into my account every friday.
I am hoping i can get my bank charges back now that the OFT won the court case. Lets hope its sooner rather than later!
I thing that the bank can charge a fee but I think there sould be a limit to how much and how long your account is in the negative before a fee is charged. As of now the overdraft fees are ridiculous.
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