UK Banks Lose Appeal Over Scrutiny Of Charges

The banks are expected to take their case to Britain`s highest court, the House of Lords.

British banks lost an appeal on Thursday against a decision to allow the UK consumer watchdog to scrutinise current or checking account charges, in a ruling that could lead to customers reclaiming millions of pounds of fees.

Judges at the Appeal Court in London upheld last April's High Court ruling that the Office of Fair Trading has the power to assess the fairness of banks' charges, Britain's Press Association reported.

The banks are expected to take their case to Britain's highest court, the House of Lords.

The watchdog launched an investigation into the fees in 2007 after one of the biggest consumer campaigns in recent years, in which hundreds of thousands of customers attempted to claw back fees.

Campaigners said it was grossly unfair to charge people up to 35 pounds ($50) if they have an unauthorised overdraft or write a cheque without enough money in their account to cover it.

The OFT said banks' charges were not clear and a significant number of people underestimated how much they were expected to pay and how often fees were levied.

The watchdog has also raised concerns over the size of charges for services such as unauthorised overdrafts and how the fees make up a high proportion of the banks' total revenues.

The watchdog said 1.4 million people paid over 500 pounds in charges a year in 2006 -- many of them vulnerable and low-income customers paying fees as a result of having insufficient funds. On average, banks make 152 pounds per current account.

Banks reject the criticism and say their charges are fair and clear. Some analysts say banks could start charging people to run a current account if they are forced to cut fees and pay back charges.