Bank charges - A victory for the Banks ?

The Supreme Court (formerly the House of Lords) has overturned the previous decisions of the High Court and Court of Appeal. The Supreme Court has decided that the Office of Fair Trading does not have the right to assess the fairness of bank charges. The Supreme Court's decision was reached based on how the Office of Fair Trading set out and argued its case. This is a victory for the banks.

 

It remains to be seen what will be the full impact of this decision. The Supreme Court has decided not to refer the matter to the European Court of Justice, so an appeal is extremely unlikely. However, in its judgment the Supreme Court suggested that the Office of Fair Trading may be able to challenge the fairness of bank charges on other grounds.

 

The Office of Fair Trading has not given any indication of whether it intends to continue its investigation into bank charges in light of the Supreme Courts' decision. The Office of Fair Trading is currently considering it position and has indicated that it is likely to make a further announcement as to its plans in late December 2009.

 

Based on the decision some banks have already indicated that whilst they will consider claims from those in financial hardship all other claims will be rejected. However, it is not known how those banks are defining financial hardship. Where claims have already been issued in the English courts it is likely at present that those claims will be dismissed.

 

Whilst the result is being heralded as supporting the current system of free banking for those in credit, even this is not certain. Parliament has been watching this case with interest and given the outcome may intervene to limit future charges. Whilst this will inevitably take some time, if it does occur, no doubt the banks will revisit the services they offer and the way in which their customers are charged for them.

 

All in all, it is likely to take several weeks or months to find out exactly how the Office of Fair Trading, the English courts, Parliament and the banks will respond to this decision and to establish the consequential implications of their actions.