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KNOW THE PENALTIES; Customers have to face up to high charges as court backs the banks.

Byline: ALEX MORGAN

THE recent Supreme Court decision on overdraft charges affects everyone with a current account.

But how you are affected will depend on whether you generally stay in credit, sometimes overdraw without permission or have claimed a refund of penalty charges.

If you don't want to lose out, you need to understand what the ruling means to you.

Banks make about pounds 2.6billion a year from penalty fees, and customers and watchdogs alike have been arguing for years that they are too high.

The Office of Fair Trading (OFT) want them slashed. But the banks claim that, since information about these costs is freely available to account holders, they are perfectly fair.

At the end of last month, the Supreme Court ruled the OFT had no authority to intervene on the matter, overturning previous High Court and Court of Appeal decisions.

Michelle Slade, of the website Moneyfacts.co.uk, said: "It seems surprising that making a pounds 35 charge for, in some instances, going just a few pence overdrawn is not regarded as unfair."

Obviously, the verdict was welcomed by the banks. But it's actually good news for some customers, too.

There had been fears that, if overdraft charges were forcibly reduced, banks would retaliate by charging all current account holders a monthly fee, regardless of whether they went overdrawn.

This now looks unlikely, which means those who don't go into the red can continue to enjoy free banking.

If you are one of them, consider moving your account to a provider that rewards customers who don't overdraw.

Abbey and Alliance & Leicester both have accounts paying six per cent credit interest for the first year. To qualify, Abbey require holders to pay in pounds 1000 a month, while it's pounds 500 for Alliance &Leicester.

Alternatively, Halifax/ Bank of Scotland's new Reward account pays pounds 5 every month you deposit pounds 1000.

For the 12million customers who regularly overdraw without permission, things aren't so rosy.

If you have already had a payout from your bank after complaining about their charges, you won't have to give it back. But for the million-plus who had refund cases put on hold pending the Supreme Court ruling, the outlook is bleak.

Financial campaigner Martin Lewis, who runs website MoneySavingExpert.com, has vowed to continue the refund fight and engaged a top barrister to help him.

However, he admits his chances of success are, at best, about one in five - so it is best for claimants to assume they won't get anything back.

Peter Vicary-Smith, chief executive of consumers' organisation Which?, is concerned some disappointed bank customers will turn to unscrupulous claims handlers.

He warned: "Beware of companies who contact you promising to get your bank charges back - and never pay an upfront fee."

No matter what these firms tell you, it is virtually certain you won't get a penny.

Peter added: "If you're in financial hardship, tell your bank. They're unlikely to give you your money back, but they have to take your circumstances into account and may waive any future charges.

"If your bank refuse to help you, then go to the Financial ombudsman."

To find out more, go to Financial-ombudsman.org.uk.

Meanwhile, for anyone who overdraws without permission, the charges will continue.

To ensure you keep them to a minimum, read the story below.

CAPTION(S):

SPELL IT OUT: Tell your bank about your money troubles
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Title Annotation:Business
Publication:Daily Record (Glasgow, Scotland)
Date:Dec 10, 2009
Words:567
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