Bank customers looking to reclaim thousands of pounds in charges have been left baffled by the latest twist in the long-running saga.

The Office of Fair Trading (OFT) today scrapped plans to appeal against the recent decision by the Supreme Court ruling that the issue of excessive penalties for breaching overdraft conditions did not come under its remit.

Despite saying it still has “significant concerns” about the personal current account market, the OFT will now only discuss a range of options, from voluntary measures to legislative change, with banks and consumer groups.

Customers who go into unauthorised overdrafts or breach their agreed limit can be charged as much as £35 for a single bounced payment, although campaigners claim the actual cost to the banks could be as little as £2.50.

If the Supreme Court had ruled against the banks it could have cost the financial sector £2.6 billion a year in lost revenue and led to the banks having to make refunds of up to £1 billion.

Consumer group Which? said the OFT's decision not to appeal had caused confusion because individuals can still take their cases against excessive charges to the courts.

Which? chief executive Peter Vicary-Smith said: “It looks like the big refund war is over but there is a narrow possibility that some people might be able to claim back their bank charges.

“The situation needs clarification and we’re looking into it as a matter of urgency.”

Freelance Brighton radio producer and teacher Marcus Patrick, who was claiming £840 back from Natwest, said he has all but given up hope of getting any money back.

He said: “Individual customers can pursue their cases but the general feeling I have got about the prospect is negative because of the vast legal departments the banks will have.

“It stinks that all the OFT can now is hope that the banks will act voluntarily.

“Why should a body whose role is to judge whether something is fair now have to go to the banks and say 'Please don't be so horrible about charges'?”