UK banks win shock ruling on overdraft fees
LONDON — High Street banks on Wednesday won a landmark Supreme Court appeal saving them from paying out more than a billion pounds in compensation for fees charged for unauthorised overdrafts, prompting a furious reaction from consumer groups.
The ruling, which favoured seven banks and a building society, overturns an earlier verdict obtained by the Office of Fair Trading over the banks’ practice of charging people for going over their credit limits.
Consumer groups called the ruling “devastating.” It will deal a severe blow to millions of customers whose claims for those charges to be refunded have been put on ice while the test case was put through the courts.
So far, Britain’s high street banks have paid out more than 559 million pounds in refunds to customers who complained about unauthorised overdraft charges.
Losing the court battle could have cost the banks an estimated 1.1 billion in payouts.
Mark Gander, co-founder of the Consumer Action Group said the ruling was “completely unexpected”.
“How amazing for the House of Lords to overturn a judgement of the High Court and the Court of Appeal, and what a devastating blow for all the people who brought claims,” he told the BBC outside the court.
Phil Jones, of Which? magazine, said most people would find the judgement “shocking”.
“We are utterly outraged. The fact that banks seem to be allowed to get away with charging whatever they like for unauthorised overdraft charges, I think the public will find that really shocking,” he told the BBC.
“The regulation seems to leave us with no protection against what the banks want to do.”
The ruling was likely to further embitter public sentiment towards the banking sector which has received billions of pounds of tax payers’ money since the outset of the global financial crisis, he said.
“We all know that we have put billions and billions of pounds into the banking sector, yet they are still charging us these outrageous fees, they are disproportionate and they are unfair.”
The lucrative charges provide a major source of revenue for the banks, netting them an estimated 2.6 billion pounds every year.