Britain’s bankers received a double boost yesterday as they celebrated a landmark court victory over unauthorised overdraft fees and saw off the threat of a crackdown on pay.
Consumer groups reacted with dismay as the Supreme Court ruled in favour of the banks in the long-running legal battle over £10 billion in overdraft charges. Millions of customers had hoped to be reimbursed. Instead, the banks can keep the cash.
In addition, the Government’s Walker review stopped short of draconian plans to name hundreds of the highest-paid bankers and dropped or watered down other proposals.
The two judgments will come as relief to Britain’s bankers who feel under siege — resented for taking £1.3 trillion in public money, loans and guarantees and blamed for triggering the longest recession of modern times.
Lloyds Banking Group and Royal Bank of Scotland, in which taxpayers have a 43 per cent and 70 per cent stakes respectively, will be two of the biggest beneficiaries of the Supreme Court ruling because each has millions of current account customers.
The surprise ruling ends a test case brought jointly two years ago by the Office of Fair Trading, high street banks and Nationwide Building Society. The OFT had challenged the legality of banks charging up to £35 for a bounced cheque when the administrative cost could be as little as £2.50.
More than one million claims have been put on hold since the case was launched in 2007. A further eight million people are estimated to have paid the charges since July 2001 but not submitted claims for reimbursement.
Peter Vicary-Smith, chief executive of Which?, said: “This is a bitter blow for the millions of people who have been patiently waiting to get their bank charges back. Not only does it give banks licence to charge what they like for unauthorised overdrafts, but it could have ramifications for other areas of personal finance.”
The five members of the Supreme Court, the highest court in Britain, ruled unanimously that the charges were not covered by “unfair contract” rules and so were not subject to regulation by the OFT.
Banks had threatened to introduce charges for all current accounts if they could no longer count on the revenue from unauthorised overdraft charges.
The review into bank pay and governance headed by Sir David Walker is published today. Banks will have to disclose the existence of all £1 million pay packages, but the recipients can remain anonymous. The new regime only comes into force for the 2010 calendar year. Many bankers in London are expecting bumper bonuses for this year, payable next spring. These will not be disclosed.
source:
