Matthew Vincent: Reason reigns over the feckless and reckless

So, 1.2m people who have been waiting for more than two years to claim back £1bn-worth of “unfair” bank charges were dealt a “bitter blow” this week when the Supreme Court made the “shocking” decision to rule in favour of the banks. There can now be no investigation by the Office of Fair Trading into the fairness of overdraft charges that cost customers £2.6bn a year. And accountholders who have lodged claims with the Financial Ombudsman and the county courts are likely to see their cases thrown out. Good!

This is a welcome moment of sanity in a dispute characterised by hypocrisy. More importantly, it is an all-too-rare vindication of financial responsibility.

I would challenge anyone who read the Supreme Court justices’ ruling to tell me what is so “shocking” about it.

Here is the summary: “At present, banks provide retail banking services on the basis that customers whose accounts are kept in credit will not be charged for the services provided; customers who have authorised overdrafts will be charged interest on the money that they borrow from the bank; and customers who incur unauthorised overdrafts will be charged, not only interest on the sums borrowed, but fixed fees for each particular service involved. The Supreme Court unanimously held that the charges for unauthorised overdrafts... were part of the price paid by the customer for the banking services provided.”

What a shock! Borrowing money comes at a price! Hold the front page!

Apparently, this was news – and very bad news – to consumer groups. Peter Vicary-Smith, chief executive of Which?, said: “The bank charges ruling marks a black day for consumers – this is a bitter blow for the millions of people who have been patiently waiting to get their bank charges back.” The next day was no brighter. “The outlook is bleak for anyone with an outstanding claim and we’re concerned that yesterday’s ruling could drive people into the arms of unscrupulous claims handlers.”

Who does he think these long-suffering people are? They are people who borrowed money that they didn’t have, without permission, and who then thought they were entitled compensation for being charged. They are the same people who, having stubbed their toes at work, get straight on the phone to “Injury Lawyers For You”. They have already embraced claims management companies with open arms.

I suspect they are also the people who appear on TV news vox pops claiming that the banks have destroyed the UK economy – and their house prices – through irresponsible lending. Peter Gerrard, of Moneyextra.com, claimed: “There will be many consumers confused after today’s ruling, having seen so much public money put into the banking system over the last 18 months, and very little in return.” But you can’t have it both ways. You can’t campaign for banks to grant cheap unauthorised overdrafts to any feckless borrower – and then become confused when they need bailing out by the taxpayer.

This irony even appears lost on the body that advises the Financial Services Authority. Adam Philips of the Financial Services Consumer Panel said banks “should realise that it’s not fair to fund their retail banking operations through charging high rates to one section of their customers”.

So what on earth is he suggesting? That unauthorised borrowing should be made cheaper? Or that financially responsible customers who live within their means should be charged, to subsidise the irresponsible?

Amid all this wailing and gnashing of teeth, I have heard only two “voices of reason”.

Justin Modray, the independent financial adviser who runs the website CandidMoney.com, said: “Far more important is the need for a stronger deterrent against reckless borrowing… I’d like to see the banks become stricter on serial offenders... At least the publicity surrounding today’s ruling might actually encourage fewer people to stray over their authorised overdraft limit for fear of being hit with a potentially “unfair” charge.”

Andrew Murray of Bargate Murray Solicitors put the argument more bluntly: “Taking money without permission is theft.”

Unfortunately, the claims management industry is determined to ignore this point and fight on. So are bank customers. According to MoneySavingExpert.com, they have downloaded 6.2m template letters for “reclaiming” bank charges. Some are succeeding. One client of claims specialist Cartel Client Review has received in excess of £10,000 in refunded charges from Halifax and NatWest.

But for the rest of us, who don’t think it a human right to spend money we don’t have, the good news is that we get free banking for a while longer. Until the next court case…

matthew.vincent@ft.com