Bank customers claiming refunds for charges on unauthorised overdrafts can expect a long wait before their claims are settled. The UK's biggest banks lost a landmark test case at the High Court on Thursday, but consumers whose refund claims were put on hold until the case is resolved should not expect a payout just yet.

The test case was brought jointly by the Office of Fair Trading (OFT), seven high street banks and a building society to decide if the OFT had the power to determine whether unauthorised overdraft fees of up to £39 are unfair. The banks always claimed that the charges are fair fees for a service.

After lawyers thrashed out the OFT's jurisdiction for 14 days at the High Court, the judge finally established that unauthorised overdraft charges do come under the 1999 Unfair Terms in Consumer Contracts Regulations (UTCCR). This means that the OFT can assess the charges for fairness and potentially cap the fees at a lower rate.

But Simeon Linstead, of uSwitch.com, the comparison website, says: “Let's not get too excited. This is the very first stage in what could be an extremely long process. In reality, this will take years to conclude.”

In the past two years UK banks have paid an estimated £784 million in out-of-court settlements to customers who have reclaimed up to six years of overdraft charges. But in July claims were put on hold until the test case was concluded. It is estimated that there are one million people awaiting refunds on overdraft charges totalling more than £713 million.

While the High Court's decision was welcomed by campaign groups, the test case is far from resolved. The banks could decide to appeal against the decision, meaning that all cases will remain on hold and banks will continue to charge overdraft fees. If the banks do not appeal, the OFT will have to decide what is a fair fee and will agree a new charging regime with the banks.

Although the Financial Services Authority says that it will continue to keep all claims on hold until the test case is resolved fully, experts say that consumers should carry on reclaiming overdraft fees from their banks. This is especially true for charges incurred in 2002, since you can only claim up to six years of fees.

Phil Jones, of Which?, the consumer organisation, says: “It costs nothing to make a claim, and a new claimant will be in the system ready for resolution when the test case is concluded.” Free template letters to send to your bank to ask for a refund can be found at Which.co.uk.

Banks make £3.5 billion every year from overdraft charges - £400,000 an hour. If the banks are forced to cap charges and refund customers, it will be a huge loss of income at what is already a difficult time.

Mr Linstead gave warning: “Make no mistake, banks will fight this battle tooth and nail, especially given the current economic climate. If they can't get revenue through overdraft charges, it will have to be taken from all the UK's 40 million current account customers.”

Case study: Charged £1,500 in six months

Rachel Louise Owen successfully claimed back £2,500 from NatWest and is delighted that the test case went in favour of the Office of Fair Trading (OFT) this week.

In 2005 Miss Owen went into her unauthorised overdraft after she became unemployed and suffered health problems. NatWest charged £32 for each bounced cheque and a £28 monthly fee for the overdraft. As her finances spiralled out of control she incurred £1,500 of charges in only six months. After taking her case to the Financial Ombudsman Service, Miss Owen went through lengthy and stressful negotiations with NatWest before the bank wrote off her £2,500 debt.

She says: “Given that it costs the banks something like 50p to process overdrafts, I was appalled that NatWest was making so much money out of me when I was so vulnerable. Charging £32 for a bounced cheque is disgraceful and the longer the test case goes on, the longer other bank customers are being ripped off.”