In February the Court of Appeal ruled that the unarranged overdraft charging terms for personal current accounts can be assessed for fairness.

The ruling is the latest decision in the long-running test case brought by the Office of Fair Trading (OFT) against the banks over unauthorised charges.

The Court found that these terms are not part of the core or essential bargain between a consumer and their bank, and therefore consumers do have protection under the Unfair Terms in Consumer Contract Regulations (UTCCRs) for these terms. UTCCRs protect consumers against unfair standard terms in contracts they make with traders. The OFT, together with certain other bodies, can take legal action to prevent the use of such terms.

Welcoming the judgement the OFT said: “This judgment confirms the OFT‘s long-held interpretation of this important aspect of consumer law, and is one that consumers themselves would identify with. It is also relevant to businesses across the whole economy.

“We are now analysing the implications of the judgment for our ongoing investigation. The OFT has already written to the banks with its provisional view on the fairness of the terms, setting out its concerns that they may be unfair. We expect to reach a final decision on fairness later this year.”

Chris Warner, of the consumers’ association Which?, said: “It is great to see the Court of Appeal being so unequivocal in their guidance to the banks that this is the end of the road.

“They should now let the OFT do its job. The banks have the right to appeal to the House of Lords but the Court of Appeal could not have been clearer that that is not the appropriate way to go forward,” he added.

Since the case started in July 2007, tens of thousands of claims for the return of overdraft charges have been frozen in the English and Scottish legal systems, waiting for a final decision on whether bank overdraft charges are fair or not. If the OFT ultimately wins the case, several billion pounds could potentially be refunded to millions of bank customers.