No-one has a crystal ball, though we were delighted that one of our clients put her job down as clairvoyant. She had after all chosen bankpenaltyclaims.com to do her business so we hope her vision of the future is accurate!

The OFT has been investigating the banks’ procedures for over a year now and thinks, (as does the general public) that charging people £30 or £38 for a default, which could mean going over their credit limit by eight pence for a matter of hours is unfair and extortionate. But their argument to the court relies on a technical matter. The judge is being asked to interpret the exact meaning of the Unfair Terms in Consumer Contracts Regulations (1999) (UCTTR).

If he accepts the OFT’s arguments by ruling against the banks some time in April or May the case will not stop there. One possibility is that the banks could appeal the judgment, but even if they accept it the OFT will then have to issue new proceedings to establish what the reasonable costs of issuing a default letter to a customer who has overdrawn his account might be. The OFT may announce its own view and the banks could throw in the towel and accept its figures but they may dispute them.

Both sides agree that the banks are entitled to make some sort of charge for bouncing a cheque or a direct debit or for allowing a client to exceed his overdraft limit. The burning question is how much. This second trial, if it occurs, will thrash out what a default letter actually costs a bank and allow it to deduct this sum from the penalty charge so claimants are not going to be given back 100% of their penalties.

Set against this is the likelihood that a court would give a clear ruling on recoverable interest if it declares the charges illegal. Chancery cases suggest that claimants who have paid high rates of interest on their penalty-charge debt (an average of 16-17% on authorised overdrafts, 21-22% on credit card borrowings and 29% on unauthorised borrowings) would be entitled to claim compound contractual interest as part of their loss and add court rates of 8% simple interest on top. For people who have been heavily in debt for a long time five years' compound interest at 16-29% with court rates of simple interest on top could add a welcome bonus to each claim.

What might the first High Court judgment be and what will happen afterwards?

This is unlikely to be the end of the matter. The OFT has deliberately limited its statement of claim to the issue of whether the bank penalties are unfair under the UCCT regulations. If it loses that argument it may pursue a Common Law remedy