District Judge rules in favor of bank in overcharges case

In the wake of criticism of conduct by banks in cases of customers claiming overcharges on penalty fees, a District Judge at Birmingham County Court dismissed a customer’s claim that he was charged too high a penalty for an unauthorized overdraft. The judge called the charges, imposed by Lloyds TSB (LSE: LLOY), legitimate fees for service on an overdrawn account and ruled them legal. In his ruling, the judge said that the charges “are not charges for breach of contract but part of the price of the services provided by the bank.”

The judgment is not binding to any other court, but analysts believe that it could hurt the cases of many other making similar claims against banks, especially since this was the first time a judge has ruled on the fees. The vast majority of cases have been settled out of court, presumably because the banks wanted to avoid the possibility that rulings would not be handed down in their favor. A spokesman for Consumer Action Group, which is heading a campaign against high bank charges, was disappointed with the ruling and said it is the opinion of his organization that the judge did not consider that one way banks and other businesses get around the law is by disguising penalties as fees for service.

The man who lost the claim in Birmingham County Court is also disappointed with the ruling. He has said that he might appeal his case, which the judge gave him permission to do.

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