Court rules in favour of banks on fees

The landmark ruling, handed down by the highest court, found the country's consumer watchdog the Office of Fair Trading (OFT) cannot use customer protection rules to investigate whether the fees were unfair.

"Today's decision is a hammer blow to the OFT and signals the end of the road when it comes to investigating bank charges on behalf of the public," Mathew Rea, head of litigation at law firm Dawsons in London said.

"Consumers now have the option to pursue individual claims against the bank but this would be extremely costly and time consuming."

The surprise judgement came after seven lenders appealed in June against an earlier ruling by the Court of Appeal, which said fees for unauthorised overdrafts fell under the scope of consumer contract law and can be assessed for fairness on those grounds by the OFT.

Overturning that ruling, the Supreme Court said the charges imposed by banks formed part of their fees for current account services and could not be assessed for fairness under the Unfair Terms in Consumer Contracts Regulations.

But the court said Parliament may wish to consider the matter, boosting consumer protection, and left the door open for the OFT to assess the charges on other grounds.

"The key issue is in the last bit of the judgement where they say the OFT can assess the charges on other grounds," said consumer rights campaigner Martin Lewis. "I don't think this is over but we have just lost a significant battle."

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The OFT said it was disappointed by the judgement and said it was considering whether or not to continue its investigation into unarranged overdraft charges. It will make an announcement on its decision in December.