The Supreme Court and Bank Charges
Today the new Supreme Court gave an eagerly anticipated ruling on whether or not the Office of Fair Trading (OFT) had the authority to rule on bank penalty charges. The Supreme Court was set up on 1 October 2009 to replace the historic legal role of the House of Lords as the final court of appeal in the English legal system.
The essence of the case was that the OFT had sought legal clarification on its powers to decide whether charges imposed by banks for unauthorised over-drafts were fair. Banks had charged between £25 and £40 when customers in some cases went as little as a few pounds over their agreed overdraft limit. The OFT argued that this did not reflect the true cost to the bank and that customers deserved at least a partial refund of such charges. Millions of customers (of which I am one) had lodged claims against the banks to recover these charges, amounting to several billion pounds claimed.
The High Court and the Court of Appeal previously ruled in favour of the OFT, leading many customers to be hopeful of a refund of hundreds or even thousands of pounds. The Supreme Court was widely expected to follow suit and endorse the ruling of these senior courts that the banks should be made to pay out but in a surprise decision announced today they completely reversed the position ruled in the lower courts. The Supreme Court also refused the right of further appeal to the European Court of Justice.
I share the disappointment of many people who have had their claims frozen for several years while the legal process was underway. No doubt there will be some who chose to take up individual court actions against the banks but these are now unlikely to succeed. It also remains to be seen whether individual banks will chose to make offers of settlement to those customers that have complained.
Either way, the Supreme Court will be seen as having come down on the side of the much hated bankers and against the rights of consumer groups and customers. Its credibility has not been enhanced by this decision.