Banks win legal battle on overdraft charges

The bank charges verdict is a massive black eye for the Office of Fair Trading and its chief executive who adopted the fight as his personal crusade.

John Fingleton, a former academic economist and head of the Republic of Ireland competition body, was hoping that a victory would help to transform public perception of the OFT from an obscure regulatory body to consumer champion. Today the OFT is in the spotlight for wasting two years and millions of pounds of public money on a failed adventure that has left consumers in the same, or a weaker, legal position than before.

Yesterday the OFT was muted, saying only that it was disappointed with the ruling and was considering its options. Those include a steer from Lord Phillips of Worth Matravers, President of the Supreme Court, who suggested in his judgment that the OFT “look at another route” in its campaign.

Lord Phillips was highlighting an alternative legal approach the OFT might use to force a rematch against the banks. An explicit suggestion from such an important figure is likely to give the OFT some solace. Critics say that the campaign was fundamentally flawed. Jonathan Richards, a partner at the law firm Eversheds, said: “Legally the challenge was based on a misinterpretation of the regulations.”

But supporters counter that the High Court and the Court of Appeal agreed with the OFT’s interpretation that it has jurisdiction to evaluate overdrafts. They say the case only became flawed when the Supreme Court turned the tables, a result no one was expecting, and that few public bodies would have the appetite to take on the might of the banking sector.

Whether the setback will affect consumer confidence in the OFT is debatable. Most consumers are largely unaware of the body and its impact on them, something that a trophy victory was supposed to change.

The OFT may now gain notoriety as the watchdog that took on the banks and lost, but this stigma is unlikely to stick. This is because most bank customers still consider consumer groups such as Which? or Moneysavingexpert.com, a website that has championed the fight against bank charges, as the public face of the campaign. Perhaps unsurprisingly, neither group had any criticism of the OFT yesterday.

Source: Times Online

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