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Thousands of customers only discovered the mistake when they saw their card or bank account and found they had been charged double for their items.

They have been warned they not get their money bank until next week, meaning customers could be in debt and facing bank charges.

Only those who shopped at the store last Friday were charged double.

A spokeswoman said the error was due to a "system issue" but refused to say why the firm had not made the mistake public.

She said: "We'd like to apologise to any customer double-charged in one of our stores on Friday, October 24.

"We are a large company and from time to time, things go wrong.

"At this stage it is impossible to state the exact figure taken from customers' accounts but it is likely that this will be a total of several millions of pounds. We have rectified the error."

More than 350,000 Brits shop at Argos every day.

One customer who was affected, David Carter, 30, bought a camera worth £44.98 and a £19.99 toy at the Harlow Retail Park in Essex.

He told The Daily Mirror: "Luckily I had not spent a huge amount. But you worry about anyone who bought a bed or a TV.

"To keep this information from customers is incredible, especially when we're all struggling with bills and the credit crunch at the moment."

Last week it was announced sales at Argos have declined by historic amounts due to the slowdown in consumer spending.

Argos-to-Homebase retailer Home Retail Group reported a 19 per cent drop in pre-tax profit over the first half of its financial year.

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High street banks will today begin the latest round of a legal fight that threatens an overhaul of their retail charges at a cost of billions of pounds.

Eight lenders responsible for the majority of the UK’s current accounts, including Barclays, HSBC, Lloyds TSB and the Royal Bank of Scotland, face a challenge by the Office of Fair Trading (OFT), the consumer watchdog, to their practice of imposing fees for processing transactions when customers have insufficient funds.

The OFT, as part of a wider review of current accounts, is seeking a court ruling that the unauthorised overdraft charges are unlawful under consumer regulations introduced in 1999. It estimates that the banks earn £2.6 billion a year from the charges.

Today’s hearing is the latest stage in what is set to be a costly and protracted legal battle. In April, the OFT won the first stage after the High Court rejected the banks’ claim that the regulations did not apply. The banks will now ask the Court of Appeal to overturn that decision.

Consumers face a long wait before they will know if they are entitled to a refund as the courts will not consider the fairness of the charges until the preliminary issues are resolved. Around 50,000 claims in the county courts have been stayed pending the outcome.

Although the furore over the charges has been overshadowed by the banks’ recent financial troubles, the stakes in the case remain high. The banks had paid out almost £1 billion before a freeze on claims was imposed and they stand to lose billions more if the OFT’s action succeeds.

If the court sides with the watchdog, it could force the banks to limit or scrap the charges altogether — that, some predict, will lead to an end to free current accounts.

Speaking on behalf of the lenders, the British Bankers’ Association said the banks would continue to fight for their right to impose the charges. “The banks are appealing on this issue as they continue to believe that the fairness test of the [regulations] does not apply to these type of charges.”

The banks have been given permission by the Financial Services Authority, the financial watchdog, to continue applying the charges until the case is resolved.

In July, the OFT published a study into the market for current accounts, which expressed concern that many customers were unaware that the charges existed. It found that 12.6 million accounts — 23 per cent of the active total — had been subjected to such charges, while more than 1 million customers had amassed charges of £500 or more.

The charges increased an average of 17 per cent between 2003 and 2007, the study found.

In August, the watchdog wrote to the banks to open discussions that it intends will run parallel to the court case. Yesterday it said: “Alongside of [the test case], we continue to progress our investigation as quickly as possible and are in ongoing discussion with the banks about our provisional view on the issue of fairness.”

The lenders involved in the case are: Abbey, Barclays, Clydesdale, HBOS, HSBC, Lloyds TSB, Nationwide and the Royal Bank of Scotland.

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Bank charges came under renewed scrutiny yesterday after a student claimed she had been charged more than £800 after going just 8p overdrawn.

Lloyds TSB has threatened Laura Gibson, 20, of Cheltenham, with legal action to recover the debt, which began when she made a £60 purchase in September.

The purchase put Ms Gibson 8p in the red which immediately triggered a fee of £65. As Ms Gibson did not clear the overdraft she was charged a further £30 in October, £60 in December and £78 in January. Then in May, Lloyds TSB increased its unauthorised overdraft charges to a flat rate of up to £20 a day.

She said: "This whole episode has been an absolute nightmare. I've now paid more than £300 in charges but still they want more. I've stopped using the account and the way I've been treated is disgraceful."

Ms Gibson, who is enrolled to start A-Levels in September, says the stress of the charges contributed to a nervous breakdown.

"Lloyds TSB have been harassing me by telephone and by mail, putting pressure on me to pay this money back. I feel that it is morally irresponsible that the bank can charge people such ridiculous amounts of money especially when some of the charges amount to more than my income each week."

A spokesman for Lloyds TSB said: "The charges that Ms Gibson has incurred are not for a one-off unplanned overdraft position of eight pence, they relate to an unplanned overdraft of varying amounts dating back to September 2007.

"In situations where there are extenuating circumstances, such as illness, that may affect a customer's ability to manage their finances, we can consider waiving part or all of the charges that they have incurred. We will be contacting Ms Gibson again to discuss her personal circumstances."

Watchdog attacks the bank’s £165 charge for falling into the red

Lloyds TSB was named last week as the worst offender for punishing customers who fall briefly into the red.

Those in the Lloyds TSB Classic Plus account who exceed their agreed overdraft limit by £50 for two weeks are charged £165, finance website Moneynet.co.uk reports. This compares with HSBC’s £25.10 charge and £30.52 by Barclays. Alliance & Leicester, second after Lloyds, charges £95.

A damning report by the Office of Fair Trading (OFT) last week said that banks rake in about £8.3 billion from current account charges. The charges are equivalent to £152 per account and represent greater income than savings and credit cards combined.

The report also accuses banks of being opaque about how they derive revenue from accounts, confusing customers and making it difficult to compare deals.

John Fingleton, OFT chief executive, said: “Personal current accounts are a vital gateway to effective participation in the economy. But this market is not serving consumers well.”

Meanwhile, the OFT has taken banks to court over the legality of overdraft charges, although banks are appealing against the court’s verdict that they come within the OFT’s remit. A second hearing on whether the charges are unfair and what a fair charge would be has been delayed until the appeal is heard.

The OFT was particularly critical of lenders that charge a high interest on overdrafts, but offer negligible or no interest on current accounts. Fingleton said these were “a type of stealth payment”.

The report says banks make almost twice as much from paying poor in credit rates to customers than they make in levying charges. Income generated from not paying higher rates of interest is estimated at £4.6 billion, while charges associated with insufficient funds are £2.6 billion, it says.

First Direct, Barclays and the Co-op do not pay interest on current accounts, while Royal Bank of Scotland and NatWest pay only 0.1%.

Michelle Slade, analyst at Moneyfacts.co.uk, the comparison site, said: “The fact that these institutions pay no or little credit interest is disgraceful. With inflation as high as it is, anyone with money with these banks is effectively losing money.”

The best interest rate is Alliance & Leicester’s Premier Direct account. It pays 8.19% on balances up to £2,500 but 0.1% on sums above this. At least £500 has to be paid into the account each month.

Cahoot pays 3.69%, the highest in-credit interest rate without any catches. If you want a chequebook with the account, the rate is 3.59%.

Bank charges for those regularly in the red rose by 17% between 2003 and 2007, the OFT reported. About 12.6 million accounts, or 23% of UK accounts, incurred at least one unauthorised overdraft charge in 2006. Such people should choose an account with a low overdraft rate. Norwich & Peterborough building society offers 0% on authorised overdrafts for six months, then charges 7.74%.

Most bank customers are unsure how bank charges work. Moneyexpert, a comparison website, said 71% of customers described bank charges as unclear. Only 17% understood the charges.

Moneyexpert said: “One logical conclusion of the OFT report would be to remove the less visible fees imposed by banks and replace them with simple monthly charges similar to the existing ‘packaged account’ model.”

However, it is feared that a crackdown on charges would result in the end of “free” banking. A spokesman said: “If and when the decision is made to cap the unauthorised overdraft fees and unpaid charges it is inevitable that we will move towards paying monthly or annual fees for our personal banking.”

Angela Knight, chief executive of the British Bankers Association, said: “Yes, you can incur charges if you do things without making arrangements first, but do you really want to pay for ATM use, pay for statements, pay for direct debits in this country?

“Surely people don’t. The Office of Fair Trading unfortunately does need to perhaps look at that balance as far as its report is concerned.”

Lloyds TSB dismissed the Moneynet study.

A spokesman said: “The most common scenario for our customers is to be overdrawn for only one day, in which case they would be better off with us than with many of our competitors.”

The OFT study began in April last year.

In 2001 the Cruickshank Report said that savers were not adequately informed and found financial products difficult to compare.

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The waiver that allows banks to freeze compensation claims has been extended for six months

Thousands of savers who are pursuing their banks over unfair overdraft charges will have to wait at least six months more to learn if they will receive compensation.

The Financial Services Authority (FSA) announced today that it is extending to January the waiver that allows banks not to pay out on claims.

The waiver was introduced in July last year when the Office of Fair Trading (OFT) started a court action to prove that high charges for unauthorised borrowing are unfair. It was due to expire next Saturday, but the court case is far from complete and the FSA has said that it will allow banks to put claims on hold for a further six months.

Dan Waters, director of retail policy at the FSA, said: “The FSA continues to work closely with the OFT and the banks in reaching a resolution on the fairness of unauthorised overdraft charges. The waiver will be for six months, by which time we expect to have a decision from the Court of Appeal."

While the waiver is in place the Financial Ombudsman Service has agreed not to proceed with complaints. Cases in the county courts have also been put on hold.

Martin Lewis, of Moneysavingexpert, the consumer website, said: "It is nearly a year since the FSA first kiboshed reclaiming, and people are still sitting on their hands, unable to try to reclaim money that was taken from their accounts without their permission. The banks, meanwhile, continue to make hundreds of millions of pounds in charges. How long are people expected to wait?"

However, other consumer groups have welcomed the extension because it means that claims can be made going back for a longer period.

The rules state that you are able to make a claim for charges incurred over the past six years. As long as the waiver is in place, consumers can claim charges dating back to July 2001.

Last week an OFT report claimed that high street banks are making about £2.6 billion a year from bank charges. The report also criticised the banks for the complexity of their charges as well as their lack of transparency, making it difficult for customers to compare current accounts.

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Britain's biggest banks will appeal against the findings of a High Court test case on penalty charges, in an attempt to stop an Office of Fair Trading (OFT) investigation that could cost them billions of pounds.

Today, eight high street banks, including Barclays, HSBC and Royal Bank of Scotland, will seek permission to appeal against a High Court judgment allowing the OFT to press ahead with an investigation to determine whether bank charges are unfair.

The appeal will cause disappointment for hundreds of thousands of customers who are trying to reclaim penalty fees after going overdrawn or missing payments.

The Financial Services Authority (FSA) has granted the banks permission to put claims on hold until the judicial process is completed. Tens of thousands more cases initiated in the county courts or with the Financial Ombudsman Service have also been suspended, pending a final judgment.

Phil Jones of Which?, the consumer organisation, said: “The banks should stop stringing this out. The charges are seen as unfair by consumers so they should do the decent thing and pay compensation to those who have made a claim and reduce the fees to a fair level.”

However, as the banks struggle with their own financial problems, analysts say that they are not going to accept a judgment that could lead to customers reclaiming billions of pounds.

The banks are concerned that if the OFT is allowed to proceed, it could cap the fee for bouncing cheques or exceeding overdraft limits at a far lower rate than the £30 typically charged.

It could even force banks to refund the difference between the charges they imposed and a new acceptable rate of penalties set by the regulator.

Analysts estimate that a cap on overdraft charges could cost the banks £10billion in lost revenue and force the end of free banking.

The OFT has not announced whether it believes that the current level of overdraft charges is unfair, or what a fairer amount would be.

However, analysts point to a previous OFT ruling on credit card fees that forced the banks to cut charges from up to £35 to £12 as an indication of which way it is likely to go.

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THE majority of bank customers would rather be hit by expensive overdraft and late payment fees than start paying for everyday banking services, according to new research.

Bank charges, as high as £39 for a bounced cheque, are currently being scrutinised following a test case brought by the Office of Fair Trading (OFT). The OFT believes the fees are disproportionately high and do not represent the costs involved for the banks.

However, there are fears that the banks will consider other ways to raise money, including ending free banking for all customers, if the OFT is able to force a cap on overdraft fees.

That won't go down well with savers, according to a new survey by comparison website Moneyexpert. It reveals that 58 per cent of consumers are not prepared to pay for a bank account and warns that the views of the “silent majority” who manage their account well are not being heard.

Opposition to fee-based banking is particularly strong amongst those who have never paid a bank charge. Around two in three people – 66 per cent – say they would refuse to pay for a current account. The website estimates that over 80 per cent of bank customers don't pay overdraft charges currently.

Sean Gardner of Moneyexpert says: "Given that most people would prefer not to see the end of free banking and would only be prepared to pay a modest monthly fee the majority of bank customers stand to lose if the banks eventually lose this case."

The research shows attitudes towards paying a monthly account fee have hardened over the past 12 months. Of the 39 per cent who would be willing to pay a monthly fee for their bank account, most are only willing to pay between £1 and £5. Just 9 per cent are willing to pay between £6 and £10. Last year, the average ‘acceptable' monthly fee was £7.29.

Given the opposition to regular bank charges some consumer groups say the threat to end free banking is little more than "scaremongering" to put pressure on the OFT to drop its case.

Phil Jones, of Which?, the consumer organisation, says: "Eight out of ten savers say they would switch their bank if it introduced account fees. There is therefore an incentive for banks not to go down that route."

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Banks have been accused of trying to block compensation claims from customers, after they refused to accept the findings of a High Court test case on penalty charges.

Consumer groups fear that the banks will appeal against yesterday’s ruling, which allows the Office of Fair Trading (OFT) to press ahead with an inquiry that will establish once and for all whether bank charges are unfair. An appeal would delay the cases of hundreds of thousands of customers who are trying to reclaim fees after going overdrawn or missing payments.

Phil Jones, of the consumer organisation Which?, said: “The banks should concede defeat, agree with the OFT what constitutes a fair unauthorised overdraft fee and refund their customers as soon as possible. If they drag out the case, customers will keep being charged and be powerless when they make a complaint.”

Adam Phillips, of the Financial Services Consumer Panel, said: “Consumers have been left in the lurch with complaints about bank charges for long enough. The banks should not seek to stretch out the arguments by going to appeal over this judgment.”

The banks have until May 22 to decide whether to appeal. As they struggle with their own financial problems — as evidenced by Royal Bank of Scotland’s announcement of a £12 billion rights issue to cover a potential £5.9 billion write-down on its assets — the banks are thought unlikely to accept a judgment that could lead to billions of pounds being reclaimed.

If the OFT concludes that the charges are unfair it could cap fees at a much lower rate than the £30 typically charged, costing the banks an estimated £10 billion more.

The banks have an incentive to draw out the process because the Financial Services Authority (FSA) is permitting them to put claims on hold until the judicial process is completed.

Tens of thousands more cases brought in the county courts or with the Financial Ombudsman Service have also been suspended, pending a final judgment.

The British Bankers’ Association said that it was too early to give a response to the judgment, but an industry insider said that there was likely to be an appeal “against some level of the judgment”.

Campaigners fear that the banks’ delaying tactics could spell disaster for some families. Households short of cash are more likely to run up bank charges and potentially have most to gain if the OFT investigation allows them to reclaim the fees.

National Debtline said that 52 per cent of the calls it had received over the past year were from people seeking advice on bank charges. Beccy Boden-Wilks, of the charity, said: “Most people who come to us for advice have incurred overdraft charges and we always advise them to claim back the last six years’ worth of fees from their banks. Many low-income earners are forced to occasionally dip into their unauthorised overdraft, but as the cost of fees mounts up it just compounds their debt problem.”

Penalty charges are incurred for unauthorised overdrafts, bounced cheques and clearing direct debits when there are insufficient funds in the account. In some cases, charges are levied for every day an account is overdrawn, while interest also builds up if customers do not address the debts.

If the banks do appeal, the case could drag on for years, although the FSA has the power to restart the claims process.

David Black, principal consultant of banking at the financial services analyst Defaqto, said: “An idea of how long this could take is given by the four years it took to conclude the legal dispute over whether overseas credit card transactions are covered by the protection of Section 75 of the Consumer Credit Act.”

Angela Knight, chief executive of the British Bankers’ Association, denied that the banks were putting profits before customers by appealing against the High Court judgment. She said: “This judgment, which contains important points for both the banks and the OFT to consider, marks the first stage in the test case process. Further court hearings will be required before the case is concluded.”

Called to account

£10 billion - The cost to banks if they are forced to cut overdraft fees

1 million - Number of people awaiting refunds on charges

£713 million - The amount those 1 million could reclaim

£784 million - The estimated cost of out-of-court settlements to customers who have reclaimed bank charges over the past two years

£111 - The amount banks make every second from overdraft charges

Source: Times database

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Millions of people could be in line for compensation under Ofcom’s new guidelines

MORE than 10m consumers hit by “unfair” fees for their phone, TV or broadband service may win compensation after Ofcom, the regulator, announced a crack-down on rip-off charges.

In a move mirroring the dispute over bank charges, Ofcom is issuing guidelines this autumn to ensure charges are “demonstrably fair” and reflect the true cost of collecting the money.

When the Office of Fair Trading applied the same rules to overdraft charges it sparked a huge consumer revolt, as more than 2m customers made a compensation claim.

Steve Weller, telecoms expert at comparison firm Uswitch said: “If you look at the banking sector, it only takes a few individuals to successfully argue their case to start a momentum.”

Weller believes even more people could have a claim against home-services providers. The bank-charges case centred on fees imposed for things people should not have done, principally going overdrawn. The charges levied by telecom and broadband firms are for basic services such as paper bills, which many people prefer.

“This makes their case for refunds much stronger,” he said.

Fees are imposed for itemised bills, not paying by monthly direct debit, and using cheques as a payment method.

The Ofcom inquiry will also investigate charges for late payments, and fees to restore a service that has been restricted due to nonpayment.

Uswitch estimates consumers lose £237m a year in additional charges on phone bills alone.

Cristina Rebollo, 30, from west London, who works in marketing, pays an additional £1.25 a month to receive paper bills from BT.

“I prefer paper bills. I’m looking for a mortgage so they are useful as identification documents,” she said.

Ofcom confirmed its review uses the same legal framework employed by consumer groups to challenge bank charges.

Its proposed rules do not outlaw extra charges altogether. Instead, it says they must be “prominent and transparent”.

A spokesman said: “It is up to individuals to take the matter up with their provider to seek compensation through the courts if they feel charges are not fair.”

Disgruntled BT customers are already preparing to challenge the firm in the small-claims court after it announced an increase in charges for paper bills. An estimated 9m customers who receive their bills this way will see charges go up by 75p a month an additional £9 a year. The new rate will take effect from April and will net the firm an estimated £80m, according to Uswitch.

Virgin Media charges a staggering £60 a year for customers who do not pay by direct debit, and 400,000 pay the charge � an additional £24m for the firm.

Weller said: “While there may be environmental benefits to receiving bills via e-mail, it has to be about consumer choice too.”

As part of its investigation, Ofcom is also looking at charges imposed when customers break a phone contract early.

It said: “A consumer who ends a contract early should never have to pay more than the payments left under the contract period. In fact they should often pay less than this, to reflect the costs providers will save.”

Once the Ofcom guidance is finalised, the regulator will give firms three months to comply.

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The Office of Fair Trading (OFT) has accused banks of writing its contracts in a "different language" that consumers do not understand, while giving evidence in the ongoing bank charges case.

Brian Doctor, QC, representing the OFT, told the High Court that it was "entering a strange world where the banks speak a different language," adopted to avoid regulations.

The case, moved to the International Dispute Resolution Centre on London's Fleet Street to accommodate the scores of lawyers, press and public, could decide the future of retail banking charges.

The OFT is investigating complaints from consumers that bank charges on overdrafts are too high. Seven banks; Abbey, Barclays, Clydesdale, HSBC, HBOS, Lloyds TSB, Royal Bank of Scotland and the Nationwide building society, are defending the industry.

The banks have argued that they merely charge customers for services provided as part of opearting a bank account.

Mr Doctor, however, argued that the charges were not in exchange for services and that the banks automatically assumed that consumers wanted to go ahead with a transaction even if they did not have the required funds in their account.

The OFT argued that if a consumer didn't have enough money in their account then the transaction should not go through, rather than allow it to and penalise the consumer.

He said that consumers entered a relationship, or agreed contract, when opening a bank account and that it was not fair to presume they would want the bank to act in such a way without consulting them first.

"If you are one pence short then the payment doesn't have to be made," Mr Doctor told the court.

He added that if a customer had been asked in advance what they wanted the bank to do in such a situation, it would be fair, and called for a change in language in that respect.

Banks have already paid out million in refunds to consumers angered by the charges and Mr Doctor said they were now seeking a "knock out blow" to assist them in ongoing litigation with customers.

The case is expected to continue for at least another week.

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