Banks back in court

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The high street banks are back in court this week as a test case brought by the Office of Fair Trading (OFT) gets underway.

Eight major financial services providers are facing accusations of having charged unfair overdraft costs to their customers.

Britons who go overdrawn without having agreed an overdraft with their bank may be charged for doing so - but the OFT argues that such charges are often unfairly punitive.

"Regulations that deal with unfairness apply to unauthorised overdraft charges and will not address whether terms and conditions or specific charges of individual banks are unfair," the OFT states.

But the organisation adds that a further assessment of information from the banks is to take place following the high court ruling.

Among the providers accused of potentially misleading their customers are Abbey, Barclays, Clydesdale Bank, HBOS, HSBC, Lloyds TSB, Nationwide and the Royal Bank of Scotland.

The case dates back to a market study launched in April 2007, but could now be resolved in as little as three weeks.

This could come as welcome news to anyone awaiting the refund of overdraft penalty charges, as regulatory body the Financial Services Authority previously put a stop on such refunds pending the outcome of the case.

But the banks have lodged defence documents, with Lloyds TSB arguing that the charges are agreed when a customer opens their account.

In particular, the bank notes that its guidance to new customers states: "We charge a higher rate of interest for borrowing that you havent agreed with us first.

"We display this rate in all our branches and on our website."

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