SUPREME SURPRISE

 I had expected to be writing to tell you how to reclaim unfair bank charges. Because this week the new Supreme Court ruled on whether the Office of Fair Trading could decide if they were fair. And we already know the OFT thinks they are not.

 But as you have probably heard in the news the Court put the kibosh on that. It ruled that the OFT had no right under the law to decide if the charges for unauthorised overdraft charges were ‘fair’.

 Of course, no-one could reasonably say that charging £30 for a computer generated letter saying ‘you are overdrawn’ was fair in any normal sense of the word. Or that it was fair to allow a direct debit payment to take you into an unauthorised overdraft and then charge you £35 for the privilege.

 But their lordships (the current Supreme Court Justices are still Lords and Ladies) held that the price for a service such as bouncing a cheque or writing a letter was not subject to any test of fairness. It was just a matter of a trader setting a price for a product and a customer deciding whether to buy it or not. To the Justices the specific charge for an overdraft service is just the same as the price of a pound of carrots. If the shopkeeper said they cost £1000 you would be free to say ‘no thanks’ and take your business to another stall.

 That leaves around a million people who have complained about their charges very unlikely to get a refund. Though those that pocketed nearly £600 million before July 2007 when the court action began will not have to pay it back.

 The banks are not let off the hook completely. Two of the five Justices said that Parliament might want to look at the rules to see if consumers should have more rights. Lord Phillips, the Court’s President, said the ruling did not mean the banks were exempt from the test of fairness if the whole package of the overdraft service and its cost were looked at. He hinted strongly that if the Office of Fair Trading has appealed on that broader point it might have been more successful.

 The only woman Justice on the panel of five, Lady Hale, said that lack of competition was the real problem. The OFT is undertaking of what it calls a market study of current accounts. If it finds there is not enough competition it could still force changes on the banks.

 Campaigners are licking their wounds. But those who keep their finances out of the red are feeling happy. The threat of monthly fees for a current account or paying to take your own cash out of a machine is gone.

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