Reuters - Clarity on bank charges could take over a year

LONDON (Reuters) - Banks, financial regulator and consumer watchdog hailed the start of a test case on bank charges as bringing much needed clarity to a confused situation -- but experts warned it may take over a year to achieve that.

The Office of Fair Trading (OFT) started High Court proceedings on Friday to rule on whether bank charges on unauthorised overdrafts are fair. Eight of the biggest banks and building societies have joined the OFT, saying they want to clarify the law as well.

The Financial Services Authority -- which said it had found "significant deficiencies" among banks in their approaches to handling complaints about the charges -- welcomed the case.

The regulator suspended the refund process until the court ruling is given, although claims can still be made and banks will need to refund charges if the ruling goes against them.

The FSA said it will review the waiver after two months and again after a year, although a decision may not be known then.

A lawyer familiar with the case said the OFT and banks had agreed to proceed as quickly as possible, but it could take over a year. "Everybody accepts that, and whilst the aim is to take less time, it could take over a year," the lawyer said.

The process will take time due to the involvement of eight big companies and the OFT and complex and unclear legal issues, the lawyer said.

David Black, head of banking at financial research firm Defaqto, warned the test case could drag on for years.

"The simple fact is that the amounts involved for the banks are enormous and they're clearly going to argue their corner. Regardless of who wins the High Court case appeals are possible and, frankly, likely," Black said