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: HSBC Holdings Plc, Royal Bank of Scotland Group Plc and six other UK lenders won a court bid to halt an antitrust regulator’s challenge to fees that lenders charge customers who exceed overdraft limits.
The Supreme Court, the highest tribunal in Britain, reversed two earlier rulings that said overdraft fees are subject to laws regulating unfair terms in consumer contracts. The ruling may block the Office of Fair Trading from challenging whether the specific terms used by the bank are unlawful. Banks earn about a third of their retail revenue from overdraft charges a market study last year found, the London- based OFT said.
Banks’ profit margins are under pressure as they face increased competition for customer accounts to fund lending, after wholesale credit markets seized last year.
“The banks may not be the most popular institutions in the country at present, but that does not mean that their methods of charging for retail banking services are necessarily unfair when viewed as a whole,” Justice Brenda Hale said in the judgment.
Supreme Court president Nicholas Phillips said that customers agreed to pay bank charges as part of the price of having a current account. He said the fees “might still be open to assessment by the OFT” under consumer contract rules. Corinne Gladstone, a spokeswoman for the OFT, said the regulator will make an announcement next month.
Judges at both the high court and the Court of Appeal had ruled overdraft fees are subject to laws regulating unfair terms in consumer contracts, allowing the OFT to continue its legal challenge. “This is a stunning victory for the banks which will provide greater legal clarity going forward,” said Ed Crosse, a finance litigation partner at UK law firm Osborne Clarke.
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