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Britain: Banks win Supreme Court case on overdraft charges


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Millions of bank customers seeking billions of pounds of overdraft charge refunds have been dealt a major blow by a Supreme Court ruling. The court has overturned earlier court rulings that allowed the Office of Fair Trading to investigate the fairness of charges for unauthorised overdrafts.


The decision follows more than two years of test case litigation. At stake is an estimated £2.6bn of annual income for the banks, which had appealed against earlier rulings.


Seven banks and one building society wanted the court to overturn two previous rulings that would let the OFT investigate their overdraft fees. In a three-day appeal in the House of Lords in June, the banks argued they would receive a "deluge of litigation" if the decision was made against them.


All new claims against banks were effectively suspended in July 2007 when the OFT and the banks agreed to stage the test case to see if the overdraft charges were legal or not. The OFT has previously said that even if it lost, it would still try to use other powers, perhaps by instigating a full competition commission enquiry, to attack overdraft fees.


The Supreme Court's president Lord Phillips said that bank customers agreed to pay overdraft charges as part of the price of having a current account, so they fell outside the scope of the appropriate regulations. But Lord Phillips added that this was not the end of the matter as the OFT could still try to scrutinise bank charges under other parts of the regulations.


"This will not close the door on the OFT's investigations and may well not resolve the myriad cases that are currently stayed [put on hold] in which customers have challenged the relevant charges," he told the court.


The Supreme Court ruling will come as a bitter blow to the consumer organisations who have campaigned against what they considered to be unfair overdraft charges. The Court said it would not allow an appeal by the OFT to the European Court of Justice. The judge did not give any explicit guidance as to how the judicial authorities should deal with the frozen cases.



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This wouldn't be such a big deal if there were real competition in the banking sector. But there isn't - these banks are propped up by taxpayer dollars and cheaper-than-natural interest rates. Overdraft fees are like spitting in the face of the people who keep your shitty business afloat.

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