OFT bank charges investigation derailed by Supreme Court ruling

Laurence Rabinowitz QC

The Office of Fair Trading suffered a major blow in the Supreme Court this morning when the country’s most senior judges ruled that the regulator could not investigate the fairness of overdraft charges for unauthorised bank charges.

The five justices of the Supreme Court, led by president Lord Phillips of Worth Matravers, ruled that such an investigation would be beyond the scope of the OFT.

The seven banks and one building society in question had lost their fight against the OFT in both the High Court and the Court of Appeal.

The High Court decided in April 2008 that the overdraft charges could not be deemed as penalties but they could be assessed on their fairness under the Unfair Terms in Consumer Contracts Regulations 1999.

That decision was upheld by the Court of Appeal in February but then the banks appealed to the House of Lords and that hearing was heard in June.

The decision to overturn the Court of Appeal’s ruling will come as a shock to the one million claimants who had sought compensation from the high street banks for being charged unfair overdraft fees.  Those actions had been stayed until the 26 January 2010 pending the outcome of the two year battle. It is believed they will now be struck out altogether.

The line up:


The Office of Fair Trading: In-house team instructed Jonathan Crow QC, 4 Stone Buildings.


Abbey: Wilson Thorburn, Ashurst, instructed Ali Malek QC, 3 Verulam Buildings.

Barclays: Colin Passmore, Simmons & Simmons, instructed Brick Court’s Jonathan Sumption QC at the appeal stage (instructed Ian Milligan QC of 20 Essex Street in the High Court and Court of Appeal)

Clydesdale Bank: Michael Barnett, Addleshaw Goddard, instructed Richard Salter QC, 3 Verulam Buildings.

HSBC: Simon Orton, Freshfields Bruckhaus Deringer, instructed Mark Hoskins QC, Brick Court

Lloyds TSB: Philip Parish and Andrea Monks, Lovells, instructed Bankim Thanki QC, Fountain Court.

HBOS: Marc Florent, Allen & Overy, instructed Robin Dicker QC, 3-4 South Square

Nationwide: Ewan Brown, Slaughter and May, instructed Geoffrey Vos QC, 3 Stone Buildings

Royal Bank of Scotland Group: James Gardner and Andrew Hughes, Linklaters, instructed Laurence Rabinowitz QC, One Essex Court.

The ruling justices of the Supreme Court

Chair: Lord Phillips

Lord Walker

Lady Hale

Lord Mance

Lord Neuberger