Frozen fee claims reach one million

Figures show nearly one million claims for unauthorised overdraft charges have been frozen since July 2007 following the news that the cases will go to court to establish if the charges are fair.

According to the Financial Services Authority (FSA), banks have put 972,565 claims from consumers over the fees on hold and a further 26,914 cases that were going through the UK courts have also been frozen.

The Office of Fair Trading (OFT), seven banks and a building society are pursuing a High Court test case to establish whether the charges are fair, so until a decision is reached the claims will continue to be put on hold.

However, the case is likely to be a drawn out process after the banks won the right to an appeal at an earlier High Court.

Also, no date has so far been set for the hearing and even if the banks lose their case, a second hearing would have to be held to establish whether the charges are fair.

The process would then be extended even further as decision was established as to what a fair charge would be.

The OFT, which has launched its own investigation into the charges alongside the legal action, said that it will not have reached a verdict until the end of this year, meaning claims will be frozen until at least the end of the year.

The FSA said: "These numbers show why this issue is so important to resolve by gaining legal clarity - as it affects so many people."

Campaigners are arguing that while people get charged as much as £35 for going into an unauthorised overdraft or a single bounced payment, it only costs a bank £2.50.

A test case was launched after banks paid out £559 million in refunds when thousand of consumers started to reclaim the charges.

However, no more payments will issued until a decision is made.

The banks involved in the test case are Abbey, Barclays, Clydesdale, Halifax Bank of Scotland and Lloyds TSB, HSBC, Royal Bank of Scotland Group and Nationwide Building Society.