JUDGMENT ON NEXT STAGE OF OFT TEST CASE – February 26 2009
Seven banks (the "Banks") and one building society are engaged in a High Court test case with the Office of Fair Trading ("OFT") to clarify the law in relation to unarranged overdraft charges. The test case process was initiated by the Banks and the OFT, to bring clarity to an issue which is of concern to a large number of bank customers. You can read about the previous stages in the test case by following the links below.
The latest development in the test case process is that the Court of Appeal issued its judgment on Thursday 26 February 2009.
The Banks had appealed the Court’s earlier decision that their current terms and conditions were assessable for fairness under the Unfair Terms in Consumer Contracts Regulations 1999 (“UTCCRs”). The Court’s earlier decision that the Banks’ terms and conditions relating to unarranged overdraft charges were not capable of being penalties (except for one term relating to one bank) was not appealed.
The Court of Appeal has ruled that the Banks’ terms are assessable for fairness. The Court held that although the Banks provide a service to customers when considering an unarranged overdraft and either providing an overdraft or returning the payment, the charges for these services are not an essential part of the bargain with customers when they open their account.
Although the Court of Appeal found that the charges can be assessed for fairness under the UTCCRs, the Court did not consider whether the charges were actually unfair. That is a question that can only ultimately be decided by the Courts.
The judgment highlights the complex issues involved and the Court of Appeal said it reached its decision "not without hesitation". The Banks will apply to the House of Lords for permission to appeal the Court of Appeal’s decision because:
The Banks remain committed to resolving, through the Courts, the legal issues concerning unarranged overdraft charges. The Banks and the OFT agreed that the case should move forward as quickly as possible and this has been achieved, with assistance from the Court. The Banks expect that the case will continue to progress as quickly as possible and will work with the OFT to achieve that.
A further hearing or hearings will be required in order for the Court to determine the issue of fairness. The Banks believe their charges are fair and that the charges will therefore be upheld by the Court at the next phase.
As previously agreed with the Financial Ombudsman Service and FSA, customer complaints relating to unarranged overdraft charges will remain on hold. The Court of Appeal has recommended that County and Sheriff Court cases relating to unarranged overdraft charges should remain on hold.
Please continue to refer to our website for further information. We will continue to post updates to keep customers informed of progress on the test case.
Where can I find out more?
You can find more information through the following links: