Court clears OFT to probe bank charges

LONDON (Reuters) - The Office of Fair Trading won a legal victory on Thursday, the first stage of a lengthy process that potentially paves the way for bank account holders to reclaim billions of pounds in fees.

The High Court ruling allows the OFT to press ahead with its investigation to determine whether banks can legally charge customers who slip into the red without prior agreement.

But Mr Justice Andrew Smith stopped short of saying whether charges for unauthorised overdrafts were unfair.

The OFT launched an investigation into the fees in March 2007, after a consumer backlash that saw thousands of Britons claiming back fees going back up to six years.

In the first half of 2007, Britain's biggest banks refunded more than 400 million pounds.

But several banks disputed whether the charges -- typically between 24 pounds and 39 pounds for each unauthorised overdraft -- were subject to oversight by the OFT, triggering the legal dispute.

Mr Justice Andrew Smith backed the OFT, which argues that the 1999 Unfair Terms in Consumer Contracts Regulations can be applied to overdraft charges imposed by the bank and, therefore, the banks can be sued.

But he added this did not necessarily mean the terms imposed by banks were unfair.

"I reject the banks' contention that the Relevant Terms (the bank terms under challenge by the OFT) are exempt from assessment as to fairness under the 1999 Regulations," he said.