High Court bid on overdraft charges

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The Office of Fair Trading and seven high street banks and a building society are jointly bringing the case to settle the issue after consumers began to reclaim millions of pounds through the courts.

The competition watchdog will argue that unauthorised overdraft charges come under the scope of the 1999 Unfair Terms in Consumer Contracts Regulations.

If the High Court, which is sitting at the International Dispute Resolution Centre in Fleet Street, rules that this is the case, there will then be a second hearing in which the OFT argues what a reasonable level for the charges would be, based on its market study.

The OFT, which began investigating the charges in March last year, believes banks charge consumers more for unauthorised overdrafts than it costs them to provide them.

It has also said the fees mean customers are being given credit on "uneconomic terms", while the charges are also "disproportionate" to the amount of money borrowed, although it has stopped short of saying it thinks they are unfair.

Consumers who breach their agreed overdraft limit, or who go into unauthorised overdraft, can be charged as much as £35 for a single bounced payment, although campaigners claim the cost to the banks could be as little as £2.50.

But the banks say the charges are clear and fair, while they are also expected to argue that they pay for a service, namely considering whether to grant customers an overdraft.

It is thought that several hundred thousand people have so far successfully reclaimed the charges from banks and building societies, encouraged by websites such as MoneySavingExpert.com and a campaign run by consumer group Which?.

It is not known exactly how much has been reclaimed, but some estimates put the figure as high as £1bn, with most people thought to have won typical payouts of between £1,000 and £2,000.