MILLIONS of consumers’ hopes of reclaiming unauthorised overdraft charges were dashed when the banks won a surprise victory in the Supreme Court.

The UK’s highest court ruled the charges do not come under “unfair contract” rules, meaning they are not subject to regulation by the Office of Fair Trading.

The ruling, which was described as a “bitter blow” for customers, who will not now be able to reclaim money they had paid out in the charges, ends a test case on the issue started more than two years ago.

More than 1m claims had been put on hold since the case was launched in 2007, while a further 8m people are estimated to have paid the charges since July, 2001, but had not yet submitted a claim to get their money back.

Which? chief executive Peter Vicary-Smith said: “This is a bitter blow for the millions of people who have been patiently waiting to get their bank charges back.

“Not only does it give banks licence to charge what they like for unauthorised overdrafts, but it could have ramifications for other areas of personal finance. The banks now have no excuse for introducing other fee charges.”

The OFT said it was now considering the details of the judgment before it made a decision on whether or not to continue its investigation into the charges.

Officials said it plans to make a statement on the issue next month.

Sarah McCarthy-Fry, Exchequer Secretary to the Treasury, said: “The Government will work with the OFT and FSA to reach a new framework for fairer bank charges going forward.”

She said it would try to reach a voluntary agreement with the banks, but warned that the Government would “take action” if this did not work.