In a surprise move ahead of the test case hearing in January 2008, the OFT have come out and publically rejected the Banking Sectors arguments with regards to overdraft charges and the like – the payments at the centre of the overcharging situation which has been rumbling on for some time.

This is actually a huge body blow for the Banks, who have already paid out a staggering £570 million to disgruntled customers on a no blame basis.  The banks claim that the overdraft charges in question are actually used to fund their all round customer services, and as such they should not be covered by the rules being used to take them to court.  The OFT strongly disagree with this idea and have dismissed the argument out of hand.

We are not even at the steps of the Court yet and the two parties are starting to crank up the pressure in what promises to be an explosive court case.  There is even speculation that the banks may actually settle out of court in order to prevent a whole host of their charging measures being presented to the public.  While legally the banks have not accepted any blame for the £570 million of payments already agreed, morally they have severely weakened their case.

The only problem for the UK banking customer is the fact that whatever is taken off the banks if they lose, they will need to recoup somewhere else, whether by reduced savings rates, increased charges or some similar income producing action.  There is no way that the banks will handover what could add up to billions of pounds and let the customer off the hook.  Keep a very close eye on this, as it is only now just beginning to simmer nicely!