Bank overdraft fees court decision

Bank overdraft charges have long been an issue of annoyance for bank customers especially when the size of the fees appear to be excessive however the banks have today lost a key test case on overdraft charges.

A High Court Judge ruled that the Office of Fair Trading (OFT) can use consumer contract regulations to decide if bank overdraft charges are unfair. The OFT will then be able to look at bank charges and compare these to the actual costs incurred by the bank overdraft.

According to the OFT bank overdraft charges should only allow the banks to recover certain administrative costs which would include postage, stationery, staff wages as well as a proportionate share of the costs of maintaining premises and IT systems necessary to deal with overdraft charges.

It is now expected that there will be several more High Court cases to decide what an appropriate level of a bank overdraft charge should be and once this has been completed it will be possible for those who have been over unfairly overcharged to reclaim money. These refunds could run into hundred of millions of pounds and will hit banks who are already suffering from the credit crunch. On the other hand it will bring joy to those bank customers who have been unfairly penalised by their banks over the years.