The court has overturned earlier court rulings that allowed the Office of Fair Trading to investigate the fairness of charges for unauthorised overdrafts. The decision follows more than two years of test case litigation.

At stake is an estimated £2.6bn of annual income for the banks, which had appealed against earlier rulings. Seven banks and one building society wanted the court to overturn two previous rulings that would have let the OFT investigate their overdraft fees. In a three-day appeal in the House of Lords in June, the banks argued they would receive a "deluge of litigation" if the decision was made against them.

Historic claims

All new claims against banks were effectively suspended in July 2007 when the OFT and the banks agreed to stage the test case to see if the overdraft charges were legal or not. The OFT has previously said that even if it lost, it would still try to use other powers, perhaps by instigating a full Competition Commission enquiry, to attack overdraft fees. In explaining his ruling, the Supreme Court's president Lord Phillips said that bank customers agreed to pay overdraft charges as part of the price of having a current account, so they fell outside the scope of the appropriate regulations.

But Lord Phillips added that this was not the end of the matter as the OFT could still try to scrutinise bank charges under other parts of the regulations. "This will not close the door on the OFT's investigations and may well not resolve the myriad cases that are currently stayed [put on hold] in which customers have challenged the relevant charges," he told the court.

Banks' response

The British Bankers Association, which represents the banks, said it considered the decision as a "clarification of the law" rather than a "victory".

We recognise this issue has been of real concern to a large number of our customers and we are pleased that this decision now brings clarity for all parties," it said. "The banks will work with the regulators to ensure that the outstanding customer complaints are brought to a swift conclusion."

For further information please follow the link http://news.bbc.co.uk

Ratio Money Ltd – The FSA has now put out a statement. It says its waiver, which allowed banks to sit on customers' claims for refunds while the case went through the courts, has now ended. "Firms can now resume processing consumers' complaints in accordance with the FSA's complaint handling rules,".

The normal rules give the banks eight weeks to deal with complaints. Although there are more than 1million complaints in the system, an FSA spokeswoman says they will still be held to this. This means if your claim has been on hold you should get a response by 20 January.

For more information follow the link.