Bank Charges – Supreme Court judgment – Update 25 November 2009
The Supreme Court has today confirmed that the Banks' unarranged overdraft charges are an important part of current account services which the Banks provide to their customers and that the amount of those charges is not assessable for fairness.
The Banks acknowledge the unanimous decision of the Supreme Court to allow their appeal in respect of these charges. We recognise this issue has been of real concern to a large number of our customers and we are pleased that this decision now brings clarity for all parties.
The Banks will work with the regulators to ensure that the outstanding customer complaints are brought to a swift conclusion. We will also continue to work together with the OFT in connection with its on-going Market study.
Please refer to the BBA’s website or continue to refer to our website for further information.
What was the test case about?
The Test Case between the banks and the OFT sought to clarify:
(a) whether the Banks' unarranged overdraft charges were capable of amounting to penalties; and
(b) whether or not the level of those charges could be assessed for fairness under the Unfair Terms in Consumer Contracts Regulations 1999 (UTCCR).
It was envisaged that if the answer to (b) was that the level of the charges could be assessed for fairness, then the question of whether the charges were fair would later be determined in the Test Case.
In 2008 the High Court found in favour of the Banks that the charges were not capable of amounting to penalties. The OFT did not appeal against that ruling, which is unaffected by the decision of the Supreme Court.
The High Court and Court of Appeal found in favour of the OFT that the level of the Banks’ charges could be assessed for fairness under the UTCCR. The Banks appealed against the ruling of the Court of Appeal. Judgment on that appeal has now been delivered by the Supreme Court.
What has the Supreme Court announced?
The Supreme Court has found in favour of the banks and allowed their appeal.
In simple terms, this means the level of unarranged overdraft charges in personal current accounts cannot be assessed for fairness under the UTCCR.
This effectively ends the test case brought by the banks and the OFT.
What does that mean for me – I have lodged a complaint on the unfair charges. Will I get my money back?
The Supreme Court’s ruling supports the Banks' view that there are no valid grounds which can be relied upon in order to reclaim unarranged overdraft charges.
How will you be dealing with the outstanding complaints?
The FSA have said that the waiver, which allowed us to put on hold complaints relating to bank charges, has now ended.
We will be working through the backlog of complaints to consider these. We will be writing to each customer soon, although this will take some time as there are many thousands outstanding.
Can the OFT can challenge the Supreme Court's decision?
No. The Supreme Court is the final court of appeal in the UK. The Supreme Court, in its judgment, has expressly declined to refer the case to the European Court of Justice for a further ruling.
Does the court ruling apply to all banks or just the ones party to the case?
The decision of the Supreme Court only concerns the current terms and conditions of the Banks that are party to the test case. However, the principles laid down by the Supreme Court are expected to be applied to all banks.
I’ve complained via the courts in Scotland and Northern Ireland – does this apply to them?
The UTCCR apply throughout the whole of the UK and as the Supreme Court is the final court of appeal in civil cases for the whole of the UK, its decision on the interpretation of the UTCCR will also bind the courts of Scotland and Northern Ireland. In practice, it is anticipated that the courts of Scotland and Northern Ireland will also be guided by all of the rulings that have been made in the test case.
Will I continue to incur charges/fees going forward?
You will continue to incur charges in accordance with current terms & conditions. To try and avoid charges in the future, it is important you have enough money in your account to cover direct debits and other regular payments you make. If you would like to discuss your financial arrangements, please contact us to see if there is anything we can do to help in managing your account.
You can also find out more information through:
The British Bankers’ Association
The Financial Services Authority
The Office of Fair Trading
The Financial Ombudsman Service
Where can I find out more?
You can find more information through the following links:
Update to OFT test case - November 2009
Update to OFT test case - June/July 2009
Update to OFT test case - April 2009
Update to OFT test case - February 26 2009
Update to OFT test case - January 22 2009
Update to OFT test case - October 28 2008
Update to OFT test case - July 21 2008
Update to OFT test case - May 28 2008
Judgment on first stage of OFT test case - April 24 2008
Update to OFT test case - January 16 2008
The British Bankers' Association
