Wednesday week (25th November) will be D-Day for the banks in the long-running bank charges saga after it was announced earlier today that the Supreme Court will deliver their ruling on the legal battle according to MoneySavingExpert.

Both the High Court and the Court of Appeal have ruled that charges can be assessed for fairness by the OFT, and if the Supreme Court upholds that view then it could reopen the floodgates for consumer claims for compensation against their banks.

The hearing is scheduled to be handed down at 9.45am where the law lords will deliver their verdict into whether or not charges of around £39 each for exceeding overdraft limits or returning a direct debit are fair. The Supreme Court has already hinted that it thinks they are unjust and are widely expected to throw out the banks’ appeal.

Over one million claims are currently stuck in limbo and clogging up the legal system, thanks to a FSA waiver and prior to the litigation banks had already reimbursed consumers with more than £1 billion before claiming was suspended.

However, even if the Supreme Court does find in favour of the OFT there is little to prevent the banks challenging their findings and so continuing to drag the whole affair on for much longer. According to MSE, it would be hoped that political intervention after the verdict would prevent any further appeals, especially given the fact that some of the banks in question, including Lloyds TSB and HBoS are taxpayer-owned.

“I’ve had letters from Messrs Brown, Cameron and Clegg all effectively committing to that and MoneySavingExpert.com, with its 8 million users a month, will try and ensure they stick to their promise.” Martin Lewis, consumer champion and founder of MoneySavingExpert.com commented.

Could this be the clearest indication yet that banks have admitted defeat in the long running bank charges saga? In a surprise move, the taxpayer-owned RBS-Natwest group has announced it will be slashing charges related to overdrafts – breaking ranks with the rest of the banking industry.

With a decision on whether the Office of Fair Trading can regulate charges levied by banks on overdrafts and direct debits due to be delivered anytime, the move could be seen as the bank’s attempt to pre-empt any judgement and from 1st October, Royal Bank of Scotland (RBS) and NatWest customers will be charged only £5 for having a cheque bounced or direct debit returned unpaid; this is down from the current charge of £38. Meanwhile, the charge for paying an item on an overdrawn account falls from its current £30 to £15.

“This is obviously very welcome news and about time,” said Marc Gander of the Consumer Action Group. “Hopefully this is a recognition of how unfair their pricing system has been.”

If the Office of Fair Trading is successful in its ongoing legal battle with eight High Street banks – including RBS-NatWest – then banks and building societies would have to pay out billions of pounds in bank charge repayments to settle the 1.2 million cases currently being held in the legal system.

However, the decision by RBS-Natwest could be a clear signal that the banks are preparing for the worst and the move is sure to be welcomed by customers of both banks.

What’s more, such a move could well see other banks follow suit and cut their own charges in order to retain their customer base.

The case, which is currently undergoing discussion in the House of Lords could cost British banks billions of pounds should the Lords rule against them and Mr Cameron is believed to be considering a plan to introduce automatic payback of charges should the Tories win the general election. The Tory leader has already instructed the shadow Chancellor George Osborne to investigate the possibility of automatic compensation which would do away with the need for consumers having to raise a claim.

In an email sent in response to Martin Lewis of website MoneySavingExpert.com, Mr Cameron said:

“Once the legal issues have been resolved I agree with you that bank customers must be compensated quickly and fairly for any unfair charges that they have had to pay. So I’ve asked my Shadow Treasury Team to look at your suggestion that banks should pay money back automatically if the courts do rule that the charges are unfair.”

The full wording of Mr Cameron’s response can be found here.

The Tories’ promise could see the amount of compensation being paid back by banks far surpass the original figures claims Mr Lewis. Should automatic compensation occur, the banks could be forced to pay back as much as £10billion or even more; whereas if consumers were to continue to claim against their banks, the likely payout would be much less – perhaps £2-3billion.

The Lords’ verdict is expected sometime in Autumn.

This call by a major political party came in a white paper on the subject of banking reform, not only criticised bank charges, but also stated they would force credit card, overdraft and mortgage charges to be clearly visible to bank customers.

According to the Tory’s, “There have been numerous examples of unfair treatment of consumers – the mis-selling of payment protection insurance and unfair bank charges.”

Alan O’Sullivan, banking and credit card correspondent at This is Money commented: “The fact that a major political party has come out and branded bank charges unfair should be celebrated although, given the legal case on charges is now in its latter stages, they could have stepped in sooner.”

As the legal row over the legality of bank charges for unauthorised overdrafts hit the House of Lords last month, the additional pressure from a mainstream political party will hopefully provide a boost to the calls by consumer groups who had hoped the banks would accept the appeal court’s original ruling.

As the chief executive of Which?, Peter Vicary-Smith, said to the Guardian last month: “It is disappointing that nearly two years since this saga began, little has changed for the millions of consumers being hit with these charges.”

He added: “If you’re struggling with basic living costs such as rent and utility bills then you may be eligible to get your claim fast-tracked under the terms of the waiver. The FSA must take action against any bank ignoring the financial plight of its customers.”

Now if only the government would listen and lodge their support too.

Growl.