High Noon

Today marks high noon for the banks, as the the much vaunted court case begins that will determine the legality and fate of bank charges for unauthorised overdrafts.

The Office of Fair Trading (OFT) is seeking to prove that bank charges fall under the remit of consumer contracts regulations, which state that "penalty fees" must be proportionate to their cost. The banks claim that the charges, of £30 for bouncing a cheque or exceeding an overdraft limit, are not punitive and so do not fall under the terms of the act.

In the event that the OFT wins, it will begin a second case aiming to prove that fees levied on customers are too high because they exceed costs of £4 a transaction.

If the banks win, they will continue charging customers with impunity.

However, in a perverse twist, whatever the outcome of the case customers can still claim back late payment fees on credit cards of more than £12.

The banks going to court today are Abbey National, Barclays, Clydesdale, HBOS, HSBC, Lloyds TSB, Royal Bank of Scotland Group and the Nationwide Building Society. They have every reason to fight, as they make around £3.5BN per annum from these charges and stand to repay consumers £5BN if they lose.

However, whatever the outcome, you can be assured that the hapless consumer will be charged one way or another by the banks.