Unauthorised overdraft charges - the case goes on

The case management conference has predictably resulted in the banks being given leave to appeal against the recent High Court judgement.

The banks are appealing against the original ruling that unauthorised overdraft charges are assessable for fairness.

David Black, Principal Consultant of Banking for Defaqto says: "The stakes for both sides are extremely high so this has all the hallmarks of being a very lengthy judicial process. Next step is the Court of Appeal and after that the House of Lords and maybe even Europe."

"If the original judgement is ultimately upheld and a substantive hearing rules that the charges are unfairly high the most likely outcome is that a cap will be placed on the charges but, crucially, the banks will still be entitled to make an element of profit in the fees charged."

"Whilst it will clearly depend on the level of cap enforced it will almost certainly result in the current account landscape being changed significantly as the banks seek to make up any lost revenue in other ways. Limited facility basic bank accounts, which do not have overdraft facilities, will almost certainly remain free but it looks increasingly likely that charges will eventually be introduced for full service current account customers. These may take the form of either pay per transaction or a flat fee with or without discounts for taking other products from the bank or maintaining a specified minimum balance."

"Short term I also expect to see more aggressive marketing of added value accounts."