Nationwide, the UK’s largest building society, has taken to the stand in the case being brought by the Office of Fair Trading against them and seven leading banks which may change the face of personal banking in the UK forever. Mr Geoffrey Vos QC defending Nationwide said the OFT case had several flaws but admitted that one of Nationwide’s own leaflets contradicted its own position.

Mr Vos said Nationwide supported the view of the banks that the consumer credit regulations did not apply to their contracts claiming that overdrafts were a fundamental of current accounts. In drawing on 600 million of unauthorised overdrafts every day, Mr Vos argued that "this was part of the standard service used by many people every day". He went on to say "that there were different contractual positions for those customers in credit and those who are overdrawn".

He added "It follows, as night follows day, that the debit customers regard their overdraft as the main part of the service".

This is at the heart of the bank’s defence. They claim the regulations on unfair terms in consumer contracts cannot be applied to the main or core part of a contract with a customer.

Mr Vos also dismissed the OFT claim that overdraft charges are also unfair penalties under common law. He said that "the doctrine of penalties does not apply as there has been no breach of contract". He did admit, however, that one of Nationwide’s own leaflets which said customers who went overdrawn were in breach of their contracts, was a ‘googly’ and one of the OFT’s best forensic points. He dismissed the leaflet though as simply wrong.

Following on from Mr Vos, Mr Bankim Thanki QC representing Lloyds TSB said "the OFT was wrong when it said unauthorised overdrafts did not constitute a service". He said "the service requires extra work and an infrastructure to operate properly". He also said "the terms and conditions of Lloyds TSB accounts could not be taken to mean an unfair penalty charge for any contract breach".

There was "no suggestion of a levy on the customers for breaching obligations". Lloyds TSB is the UK's largest current account provider.

The High Court Test Case is now expected to last at least a further two weeks with the OFT outlining its case next Tuesday.