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There is no doubt that the 1.2m bank customers who have had their overdraft charge reclaim put on hold since July 2007 while this legal process has been played out, will be dismayed. The Office of Fair Trading, sensibly in our opinion, is going to review the detail of the ruling before considering whether or not to continue with its investigation into unarranged overdraft charging terms, and will make an announcement in December.
However disappointing it will be for those trying to reclaim what they consider to be excessive overdraft charges, it has to be remembered that a loss for the banks probably would have signalled the end of free banking for all of us. Given that 80 per cent of current account users either never - or very rarely - incur these charges, the potential impact of the banks losing this case could have cost the majority of us a lot more over the years to come than would have been reclaimed by the fifth of those people who incur these charges on a regular basis.
Even for these customers, a regular charge on the account, as opposed to one that would be applied for an unauthorised overdraft, would have racked up charges at a similar rate, so it is difficult to see what would be gained from this in the longer term. The British Bankers Association estimates there are around 54m current accounts in the UK, and adding charges of even £10 a month for these - which is actually relatively low given the average cost of charges already imposed on some accounts - would cost all of us collectively around £6.5 billion a year. It is hard to see how that would be progress.
We are one of the few countries in the world to habitually enjoy free banking, and to see that disappear would have been very bad news. But for now, customers who are likely to go overdrawn need to look very carefully at the bank accounts they choose. We have already seen Santander launch its Zero Current Account, which has no fees for overdrafts, unpaid items, or overseas ATM usage, and it is likely that the banks will try to compete more vigorously in this area.
But the banks do need to play fair on overdraft charges, and we would like to see a rule imposed where, perhaps, if you go overdrawn by less than the amount that you would be charged, then no charge is applied. It seems ridiculous to be charged £25 or more for going over an agreed limit by a penny. HM Revenue & Customs already applies a similar rule in relation to fines and unpaid tax, so there is no reason to think this would not be a more sensible approach.
We may yet see another round to this saga, but the best thing consumers can do is look carefully at the facilities they need in a bank account, and choose the one that most closely fits their needs, in the most cost-effective way.