If the OFT win their test case against the banks and their unfair charges, they will be forced to repay hundreds of millions of pounds back to their customers.

The Prime Minister said that if the banks did eventually lose the case, they should make their compensation payments as swiftly as possible to customers.

The high street banks fighting the test case have repeatedly made appeals against the decisions and are now due to appear before the Supreme Court next month.

It is hoped that should the Supreme Court finds against the banks, that they will then back down and more force any more appeals.

This latest news from RBS follows their announcement back in December 2008 where they revealed plans to begin pro-actively refunding unfair bank charges to its customers.

Starting from next month RBS will be cutting fees on bounced cheques and returned standing orders from £38 down to £5. With overdrawn bank charges dropping from £30 to £15.

RBS will also cut the monthly charges for accounts that use an unauthorised overdraft facility from £28 to £20, with card payment fees reduced from £35 to £15.

RBS Chief Executive Brian Hartzer states that the new lower fees have been introduced in response to concerns from customers; ‘This is good news for customers, not least because the fees for unarranged borrowing have been an area of ongoing concern for them,’ he said.

What this essentially means is that the continuous battle against unfair bank charges will now be delayed further and could even push the case back to 2011.

Last month the High Street banks suffered a defeat in the Court of Appeal with a judge finding that the banking charges could be subject to ‘unfair contractual terms’ laws.

The result last month marked a major boost for bank charge reclaimers with it’s decision allowing the Office of Fair Trading (OFT) greater abilities in assessing the fairness of the bank charges.

The major High Street banks who are contesting the charges include RBS/NatWest and HBOS and Lloyds TSB.

This announcement made earlier today could see banking customers reclaim billions of pounds in unfair charges from the last 6 years.

The High Court ruling comes at the end of a long legal battle and appeal case from eight High Street banks following the High Court’s similar ruling in favour of the OFT last summer.

The banks involved to have the right to appeal the judgement again in the House of Lords, which would in turn see the Office of Fair Trading’s investigation pushed back by a further six months to a year.

Whilst the British Bankers’ Association have confirmed their plans to put in a request to appeal they also stressed that this is not a sign that they wish to proceed with one.

A spokesperson said: ‘You have to ask if you can appeal before you decide if you are going to appeal. It’s just a legal process. The banks are keeping their options open.’

Should the banks decide not to appeal the verdict, banking customers will still not be able to reclaim their bank charges until the OFT delivers their own verdict and assessment on the fairness of such charges.

The OFT is already well underway with the investigation and so long as the banks themselves do not appeal today’s judgement then the OFT are expected to report their findings later this year.

The OFT said in a statement: ‘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 for these terms.

‘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.’

Many in the banking industry are claiming today’s verdict could signal the end of free banking in the United Kingdom, with banks expected to lose upwards of £2.6bn a year in lost revenue as a result.

In addition banking industry experts doubt that the banks will remove free bank accounts in the immediate future mainly due the huge opportunity to cross-sell their services to these customers.

Banks could have to refund billions in bank charges levied over the past six years. RBS is already planning to proactively refund all bank charges to its customers if it eventually loses its case against the OFT.

Marc Gander, head of the bank charges campaign organisation Consumer Action Group, said the banks will think twice before fighting today’s judgement.

He said: ‘The only thing that would stop the banks appealing is their public image. To drag this on yet another year by taking it to the House of Lords after delaying the case a year already, I think would mark them out as the people’s enemy when their reputation is bad enough already.

‘I’m not sure they would have the gall to do that. They may be so reluctant to draw this on that they may throw the towel in.’

According to The Consumer Action Group a number of their 210,000 members are currently looking into reclaiming their charges from Natwest despite the waiver that is in place.

The Consumer Action Group is already working to draft up a number of letters for its members to use in order to take Natwest to court themselves, should Natwest fail to compensate them following once the High Court case between the OFT and the eight High Street banks concludes.

CAG believes that even in the unlikely event that the Office of Fair Trading (OFT) loses their case, these Natwest customers should still be entitled to a refund of their charges.

In this case the Judge ruled last month that NatWest used terms and conditions that may have included unfair fines for falling into unauthorised overdrafts. However he stopped short of labeling these as penalties, with the matter of whether these high charges are used as penalties being central to the reclaiming case.

The judge has previously said NatWest’s charges between 2001-2003 could be assessed as penalties under common law.

In order to reclaim these charges however the consumer would have to prove that the bank charges of up to £30 were excessive, with campaigners estimating the actual cost incurred to a bank for an unauthorised overdraft is only £2.

However, consumers who are seeking to reclaim NatWest charges are being prevented from doing so by the waiver that allows courts and banks to postpone cases.

The Financial Services Authority today declined to comment on the specifics of the Natwest case, but it is believed that they are waiting to see whether Natwest plan to appeal the latest ruling before making a decision as to how to treat the customers fined between 2001 and 2003.

Marc Gander from Consumer Action Group said: ‘This really is disgraceful. If the FSA was going to act decently, they would have said the waiver for these NatWest customers is now lifted. This shows how unfair all of this is and how unjustly the FSA is acting.’

In the unlikely case the OFT losses the case, NatWest will probably settle these cases out of court as quickly as possible, he said.

In a statement, NatWest disputed that the terms in question were penalties. It said: ‘The Court did not decide that any NatWest historic terms were penalties. It found that a single historic NatWest term prohibited customers from using a card to go overdrawn but this does not mean that that term is a penalty. The OFT and NatWest are together considering how best to address any remaining issues in relation to the NatWest historic term. In the meantime, the test case continues and the waiver and the County Court stay remain in place.’

First introduced in July 2007, the bank waiver froze all bank charge cases in the county courts until the conclusion of the High Court case had been reached. The only exemption to this ruling being cases where an individual is suffering from undue hardship as a result of their fines.

The Financial Services Authority have since extended the waiver for another six months whilst the High Court battle continues in its complexities.

Whilst customers can only reclaim bank charges going back six years, this date has since been frozen from when the waiver was first introduced, so bank customers can therefore claim charges back to July 2001.

This date will remain static for a short time after the High Court case has concluded, but customers are advised to get their bank charge reclaim forms in as quickly as possible to ensure they can claim back as far as possible.

RBS is currently appealing the case in unison with seven other major High Street banks. RBS are appealing a ruling that allows the OFT to asses whether the bank charges are fair to customers.

An internal document that has been leaked from the RBS suggests that should the bank lose the overall case they have outlined plans which calculate how much each of its customers is owed and proactively return their cash to them.

The document states that RBS is ‘preparing systems and processes to pro-actively refund charges to the group’s customer base.

‘All customer accounts that are due a refund will be calculated as accurately as possible… Any monies will be accurately accounted for and reconciled.’

It is highly likely that the other banks involved in the High Court case will have drawn up similar refund plans. The other banks involved include: Abbey, Barclays, Clydesdale, HBOS, HSBC, Lloyds TSB and Nationwide Building Society.

The judge presiding over the banks’ High Court appeal is expected to pronounce his verdict before the end of the year. Following this, the OFT will make a case for why it believes banks’ overdraft charges are unfair. However the final High Court ruling on the inherent fairness of the charges is not expected until the end of 2009/ early 2010.

It appears that customers only noticed the somewhat random charges (of only a few pence) after having looked over their latest banking statements.

Abbey have since withdrawn the fees on all the customers who have contacted them, but it seems that there may be many who have not yet noticed these charges.

Abbey are blaming a computer glitch for the billing error and according to a spokesperson only a small percentage of customers were affected by the bug.

Many bank customers who have suffered financial difficulties due to unfair bank charges have since seen their cash refunded through the Financial Ombudsman Service rather than having to go through the county courts.

A waiver introduced by the Financial Services Authority has allowed banks to stall payment of reclaims until the current High Court battle between the FSA and eight High Street banks has concluded.

The only exemption to the FSA waiver are circumstances in which those suffering severe financial hardship due to hefty charges applied to their accounts for going overdrawn can still have their case heard – either through the Financial Ombudsman or via the courts.

Once a claimant has been turned down by the courts they are unable to apply to the FOS, which means that any banking customer in financial difficulty should apply direct to the FOS with their claim and bypass the courts altogether.

Since the waiver was introduced last year the banks have been very compliant in settling some 250 cases, with the FOS not having to force their hand with a formal ruling, according to Emma Parker from the FOS.

She said: ‘So far the process has been very co-operative. We have not had to make a formal ruling. We have talked to the banks and asked them to resolve the situation and they have, so it hasn’t got to that stage.’

The eight High Street banking institutions at the centre of the High Court case are currently appealing a ruling made earlier this year, which allowed the Office of Fair Trading to assess the fairness of bank charges.

The appeal cannot extend beyond the end of 2008 but, if the banks are unsuccessful, the following battle between them and the OFT could extend until the end of 2009 or beyond.

The bank has also revealed that they have already given back some £115,000,000 in 2007 following a spate of refund claims.

Whilst refunding customers the charges they have paid for unauthorised borrowing, in many cases these fees have forced the customers further into the red. This in turn will have had a detrimental effect on their UK credit report, and will in all likeliness affect their ability to apply for credit in the future. Such issues will not be fixed by the refunding of these unfair charges.

HSBC is the first major High Street bank to publish an estimate of the bill it will face if it is declared that customers were initially charged too much for going overdrawn.

Industry experts believe the banking industry has so far seen around £10,000,000,000 in profits from charging current account customers who have gone over their agreed overdrafts.

HSBC and other leading High Street banks HBOS, Barclays and Lloyds TSB are going to the High Court in an attempt to prove they acted accordingly in regards to there unauthorised overdraft customer charges.