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The UK's banks seem likely to appeal against a recent High Court ruling that the Office of Fair Trading (OFT) can scrutinise their overdraft charges.

An appeal by seven banks and the Nationwide building society is "under active consideration", a banking source told the BBC.

At stake is the estimated £3.5bn which the banks raise each year by charging customers for unauthorised overdrafts.

An appeal would probably see the issue being dragged out into next year.

The banks will make their decision known at a case management conference at the High Court in London on Thursday.

Disgruntled

After the first round of High Court hearings earlier this year, Mr Justice Andrew Smith ruled in April that the OFT had the power, under the 1999 Unfair Terms in Consumer Contract Regulations, to decide if bank overdraft fees were fair.

The issue has seen hundreds of thousands of disgruntled bank customers in the past two years trying to sue their banks in county courts or using the Financial Ombudsman Service to get their money back.

In some cases bank charges have led to customers being charged more than £30 each time they go overdrawn without permission or have a cheque bounced.

Fresh cases have been frozen since last July when the litigation between the OFT and the banks first agreed that the courts should resolve the issue.

Appeal

If the banks do appeal then the issue of the regulator's jurisdiction will go to the Appeal Court and then quite possibly the Houses of Lords before a final decision is reached.

The banks are likely to seek permission to appeal by arguing that the original decision was of limited binding authority, that the issue is of substantial public interest and possibly that the judge got the law wrong.

The banks will then have a further 21 days to submit the precise legal grounds of their appeal.

The OFT could also appeal as Mr Justice Smith rejected its claims that bank charges are also unfair penalties under common law, and that the banks' terms and conditions are not in "plain and intelligible language".

Second stage

Mr Justice Smith will also have other important issues to decide.

Both sides to the case will want to know how his ruling, which focused on the banks' current customer contracts, apply to the many claims that have been made under old terms and conditions.

And they will seek guidance on how they should proceed to the second stage of the litigation which will address the central issue of whether or not the bank's charges are fair or not.

However this stage may be delayed by any appeal on the OFT's jurisdiction in the matter.

If that happens then the banks are likely to face criticism that they are simply stalling, contrary to their publicly stated desire to resolve the legal status of the charges as quickly as possible.

The OFT launched a formal investigation into the fairness of overdraft charges last April and although it has not announced its conclusion it seems obvious that it believes that the scale and structure of bank overdraft charges are unfair.

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