February 01 2010
Supreme Court Rules on Overdraft Charges

One of the first decisions of the new Supreme Court (which in October 2009 replaced the House of Lords as the highest court in the land) came as a disappointment to many bank customers who had suffered high levels of charges after they exceeded agreed overdraft limits. The Court accepted the banks’ argument that the British tradition of free ‘in credit’ banking (rare elsewhere in the world) is only possible because of charges levied on those who go overdrawn. The decision means that tens of thousands of customers who had pending applications for refunds of charges will not now receive them. For private customers who do not go overdrawn on their current accounts, the decision may well produce the welcome result that free banking will continue. The Office of Fair Trading (OFT) has decided not to pursue further its investigation into the fairness of bank overdraft charges under the Unfair Terms in Consumer Contract Regulations. Whilst it still has concerns about the way banks operate current accounts, the OFT has conceded that a challenge to the banks on that basis has little chance of success. The banks have recently announced a plan to phase out cheques: they already charge business customers up to 65p more for writing a cheque than for paying a bill electronically. Cheques themselves are scheduled to be consigned to history in October 2018, according to a recent announcement by the clearing banks.