18 January 2008
The High Court case brought against banks by the Office of Fair Trading (OFT), over what it terms the "excessive" penalty charges they levy, got under way yesterday.
Defending the Royal Bank of Scotland, one of the eight financial institutions accused of charging too much, barrister Laurence Rabinowitz criticised the OFT's conduct as "ill-informed".
Mr Rabinowitz said that the watchdog's 2006 report into credit card charges - which contained additional claims that current account charges were unfairly high - was "unfortunate".
Following the OFT's credit card report, thousands of Britons launched refund claims against banks who had charged them for a variety of offences, including unauthorised overdrafts.
Local courts were overwhelmed by the demand from irate consumers asking for money back from banks, until the High Court test case was called last July and the cases were suspended.
"A hornet's nest had been disturbed," Mr Rabinowitz commented.
Should the court uphold the OFT's case, banks could be forced to return billions of pounds of penalty charges.
Analysts have suggested that banks, denied the funds traditionally raised through the penalties, will begin charging for cash withdrawals and other services which have previously been free - if they lose.
The case continues.
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