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Supreme Court spurns consumers in bank charge row

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The Supreme Court has ruled in favour of high street banks desperate to reclaim their authority over bank charges.

Following several High Court and Court of Appeal cases in the last two years, which allowed consumers to reclaim bank charges and the Office of Fair Trading to regulate procedures, the Supreme Court has upheld the appeal of several high-street banks to end the practice.

Around one million customers, whose own bank charge appeals were put on hold till after the court’s ruling, will now have to watch their spending as banks could begin charging up to £35 for a single bounced payment. It is thought that around eight million users have been charged since 2001.

The case hinged on whether the OFT had the authority to determine the legality of fees charged under the Unfair Terms in Consumer Contracts Regulations 1999.

The court found that, while the OFT does have the power to determine fairness in consumer contracts, this is subject to certain limits and “value for money” cannot be taken into consideration.

Contract fairness “shall not relate to the adequacy of the price or remuneration, as against the goods or services supplied in exchange”, read Regulation 6(2)(b) of the 1999 document.

Speaking after the court’s unanimous decision, Lady Justice Hale said: “The banks may not be the most popular institutions in the country at present, but that does not mean that their methods of charging for retail banking services are necessarily unfair when reviewed as a whole.”

Before this week’s ruling, banks had already paid out more than £559m to annoyed consumers, and, if the Supreme Court had sided with the public, revenue losses could have totalled almost £2.6bn a year.

Chief Executive of consumer group Which?, Peter Vicary-Smith, said: “This is a bitter blow for the millions of people who have been patiently waiting to get their bank charges back.”

“Not only does it give banks licence to charge what they like for unauthorised overdrafts, but it could have ramifications for other areas of personal finance. The banks now have no excuse for introducing other fee charges.”

The test case was brought jointly by Abbey, Barclays, Clydesdale, Halifax Bank of Scotland and Lloyds TSB, which are now part of HSBC, Royal Bank of Scotland Group and Nationwide Building Society respectively.

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Written by Andrew Hodges

December 10, 2009 at 8:34 pm

Posted in Comment, LinkedIn

Tagged with , , ,

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