LONDON (MarketWatch) -- The U.K.'s Supreme Court on Wednesday unexpectedly ruled in favor of the banking sector in a long-running battle over the legality of overdraft fees.
The ruling means banks won't be forced to automatically refund billions of pounds of fees to customers. However, the court didn't rule on whether the charges themselves were fair, meaning customers can continue with individual claims against the banks.
The fees, which are charged whenever a customer's overdraft goes over an agreed limit, are estimated to generate revenue of around 2.6 billion pounds ($4.3 billion) a year for the banks.
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The case began in 2007 when the Office of Fair Trading launched an investigation into the charges. The investigation followed a widespread consumer campaign that the charges weren't proportionate, which lead to many banks refunding some customers.
Thousands of further demands for refunds were put on hold while the case went through the courts.
Two previous rulings had gone against the banks, which include Royal Bank of Scotland , Barclays , HSBC , Santander and Lloyds Banking Group guaranteed approval payday loans.
But in a unanimous ruling the Supreme Court said Wednesday that those decisions were wrong and that the OFT doesn't have the power to investigate the size of the charges because customers effectively agreed to pay them as part of the price of having a bank account.
It's unlikely to be the end of the process, however, as the court said it hadn't decided whether the charges were fair and that the OFT may still be able to investigate using other criteria.
"This will not close the door on the OFT's investigations and may well not resolve the myriad cases that are currently stayed in which customers have challenged the relevant charges," the court said in its ruling.
The British Bankers Association said it will work with regulators to ensure that the outstanding customer complaints are brought to a swift conclusion.
"We recognize this issue has been of real concern to a large number of our customers and we are pleased that this decision now brings clarity for all parties," the BBA added in a statement.
