The Daily Mail - Millions of bank customers set to receive up to £10bn in refunds after court ruling on rip-off charges

Rip-off banks face being forced to pay refunds totalling more than £10billion to customers following a landmark court victory.

The High Court has ruled the Office of Fair Trading (OFT) has the right to decide whether charges of up to £38 for busting overdraft limits are unfair.

The decision clears the way for the OFT to rule that millions of Britons have been overcharged for going overdrawn or bouncing a cheque.

In theory - assuming the banks do not appeal to the House of Lords - refunds dating back at least six years could be reclaimed.

The news was welcomed by campaigning consumer groups as a victory for ordinary people.

However, some fear the banks will retaliate by imposing charges on all current account customers - ending the current model of supposedly free banking.

The decision by the High Court is a vindication of attempts by the OFT to curtail excessive bank charges.

It comes on the heels of the Daily Mail's Fair Play on Charges campaign, which has highlighted sky-high bank charges and helped thousands to claim refunds.

The consumer group Which? called on the banks to start paying refunds with immediate effect.

Chief executive Peter Vicary-Smith, said: 'The courts have made it clear the banks should now throw in the towel.

'This case has been going on too long and it's about time they tried to regain some of their dignity and paid customers their dues.

'This whole saga has severely damaged the banks' reputations. If they try to appeal in the face of such a clear decision, they will suffer further losses in the court of public opinion.'

The banks have generated big profits by issuing warning letters linked to overdrafts and bounced payments - each charged at £25 - like confetti.

Anger has been fuelled by reports that people, including students and pensioners, have been hit with bills of £100 or more after just going a few pence into the red.

The OFT calculates that banks and building societies have been making £2.6billion a year from unfair and excessive overdraft charges.

The High Court case has delivered a day of reckoning that means as many as 10 million people will be entitled to a refund, generating a total bill likely to top £10billion.

Such a huge bill would be a hammer blow to the banks which are reeling from multi-billion pound losses linked to reckless borrowing and expansion.

Martin Lewis, founder of the consumer revenge site MoneySavingExpert.com, said: This is a fantastic day for bank charge reclaiming. All gates to victory have now been unbarred.'

He said it now only requires the OFT to make a ruling that the charges are unfair - a decision expected later this year - in order to trigger a tidal wave of refund claims.

There are millions of claims already in the pipeline at banks and building societies. Currently, the firms currently have the right to put a hold on settling them until the legal case is concluded.

However, consumer experts said it would be wise for people to make their refund claims as early as possible to ensure they are among the first in the queue for a pay-out.

Advice and template letters on how to make a claim are carried on the Daily Mail's sister website Thisismoney.co.uk.

OFT officials have made clear that the banks would have no reason to use the loss of the court case as an excuse to start imposing monthly fees on current accounts.

However, many analysts feel that the banks will simply ignore this stance.

Michelle Slade, of the website Moneyfacts.co.uk said: 'Penalty charges are a significant revenue stream for the banks, which they can ill afford to lose at the moment. If the OFT does move to force the banks to lower charges, we could see increased costs elsewhere.

'The option that some banks may now levy an account fee is a real possibility.'

Kevin Mountford, head of banking at moneysupermarket.com, said: 'It seems the end of free banking could well be nigh.

'If banks have to reduce penalty charges they are likely to introduce a regular charge on current accounts, thus mirroring the system used most consistently across the world.'

Such a system could involve a monthly fee to cover a fixed number of direct debits, cheques and cash machine withdrawals. Customers would then be charged additional fees if they go above this number.

The British Bankers' Association gave no indication as to whether its members will appeal against the High Court ruling.

It said: 'These are important points of law. The courts can now go on to clarify the fairness of charges.

'Before that can happen the OFT has to provide the courts with its views on how charges should be assessed.'

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