Banks urged to concede defeat

A judge held that the fees levied on customers who exceed their agreed overdraft limit are subject to regulation by the OFT under "unfair contract" rules.

The decision paves the way for a further hearing to decide whether the charges are actually unfair and, if so, what a fair charge should be.

But the banks are taking time to consider Mr Justice Andrew Smith's detailed and complex judgment before deciding whether to launch an appeal, which would delay a final resolution for many months.

In the meantime, bank customers hoping to recover what they regard as exorbitant overdraft charges must wait and see - the banks, through the Financial Services Authority and the Financial Ombudsman Service, have been granted a "stay" on outstanding claims pending the end result of the court proceedings.

A final defeat for the banks in the courts would result in a bill for well over £1 billion in repayments - likely to be passed on, along with the loss of revenue from overdraft fees, to all current account holders in the form of a charge for simply having an account.

Which?, the consumer group which has run a campaign helping people reclaim fees, called on the banks to work now with the OFT to settle the case.

Doug Taylor, Which? personal finance campaigns manager, said: "The banks should do the right thing now: concede defeat, agree with the OFT what constitutes a fair unauthorised overdraft fee, and refund their customers as soon as possible."

But the British Bankers' Association said: "The banks believe their charges are fair and that the charges will therefore be upheld by the court at this next phase."

The banks involved in the case are Abbey, Barclays, Clydesdale, Halifax Bank of Scotland, HSBC, Lloyds TSB, Royal Bank of Scotland Group and the Nationwide. They contended unsuccessfully that their overdraft charges and conditions were exempt from the provisions of the 1999 Unfair Terms in Consumer Contracts Regulations.