There are many in the business world that believe the banking charges put in place by many banks are unrepresentative and therefore should be scrapped. One argument has highlighted the overdraft as vital to many people's personal and business banking needs and to charge unfairly for it is not just immoral but bordering upon illegal.



A High Court hearing is looking into allegations that the banking industry is acting illegally and has come to the conclusion that providing customers with credit was a substantial element to business and personal account services.

The whole debit and cheque cashing business would come to a halt without account credit and hence the consumer economy would suffer greatly. The banks argue that if they did not honour customer debit payments and then charge accordingly, purchasing would take a backward step to hard currency payments once again.

This is the fundamental argument of the banking industry; they believe these credit charges are perfectly legal as they are classified as banking fees rather than penalties. It may seem an argument based purely upon the different use of language, but when lawyers are concerned arguing vocabulary differences may make or break a case.

The Office of Fair Trading (OFT) has waded into the case and demanded that business and personal account charges be reigned in, the High Court however has come to another conclusion.

The High Court has concluded that the arguments on both sides depend upon one factor. This factor is the contract signed when opening a business or personal account. The High Court has stated that as long as the payments are for services within the contractual agreement and not penalties for breach of a contract, the banking industry cannot be held accountable, and subsequently should not have to refund charges.

The decision will affect personal account holders more so than those with business accounts. The outcome of the ongoing investigation is set to revolutionise the current account market within the UK; both sides, the Banking industry and the OFT are standing firm on their positions and hence the hearing is likely to go on for some time.

It has originally been scheduled to last for eight days but this figure is wholly unrealistic. The huge volume of evidence will delay the case further, while a decision is expected around Easter time the appeal process is likely to continue for at least another year.

Some personal and account holders have actually been recorded as saying that they are actually contented with the current system of charges. Only being charged for being in the red is seen by many as ideal; overdraft charges can be viewed as payment for an entire collection of services provided by the banking industry not as penalties for entering the red.

This can however be seen as a bi-polar argument as there will always be a split of account holders in credit and in their overdrafts. For those in credit, paying fees for going overdrawn is not an issue whereas those who are constantly on the subsistence level will see overdraft charges as unfair.

Depending upon which argument the High court decides to follow will have major repercussions. If the OFT's argument is upheld the banking industry will be forced to refund billions of pounds worth of penalty charges. This may seem a positive for consumers but this outcome is unlikely to be of financial gain for account holders. If banks are forced to repay charges it will surely result in increased contractual charges and the end of free banking services.