Office of Fair Trading
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OFT welcomes High Court ruling on unarranged overdraft charges
The High Court has
today confirmed the OFT's view that personal current account
unarranged overdraft charges can be assessed for
This is an important early milestone for the OFT and our investigation into this area of high consumer interest. We are now analysing the implications of the judgment for our overall investigation into the fairness of the terms. There may need to be further hearings to determine any outstanding issues arising from the judgment. The timetable for next steps will be decided by the court at a hearing before the end of May.
This case was brought by the OFT in agreement with eight of the largest current account providers. We will be working with them and other interested parties to ensure this market works well for consumers.
It is important to note that this judgment only covers points of legal principle and does not determine whether the relevant charges are actually unfair. We are continuing our investigation into the fairness of these terms and will consider our position after reviewing the detail of this judgment.
1. The judgment today sets out the judge's ruling and reasoning on a range of legal issues, including ruling that the banks' relevant terms and conditions were in, or largely in, plain intelligible language; and that the banks' unarranged overdraft charges were not penalties at common law.
2. All businesses have a duty to ensure that they are complying with the law. Current account providers will need to consider whether there are any implications from today's judgment for their current terms and conditions.
3. In April 2007 the OFT announced its investigation into the fairness of unarranged overdraft and returned item fees (referred to as 'unarranged overdraft charges'). This followed on from the OFT's initial review of such charges, where the OFT concluded that it shared the public concern about the level and incidence of bank current account charges.
4. In July 2007 the OFT entered into an agreement with the largest current account providers in relation to bringing a test case in order to ensure an orderly and timely resolution of the legal issues associated with its investigation. This stage of the case was heard between 17 January and 8 February 2008, and dealt with certain preliminary issues of legal principle relating to whether the Unfair Terms in Consumer Contracts Regulations 1999 ('UTCCRs') apply to the banks' various current terms and conditions and whether the charges are capable of amounting to penalties at common law.
5. The other parties to the test case are Abbey National plc, Barclays Bank plc, Clydesdale Bank plc, HBOS plc, HSBC Bank plc, Lloyds TSB Bank plc, Royal Bank of Scotland Group plc, and Nationwide Building Society. Together these current account providers account for about 90% of personal current accounts in the UK.
6. In parallel with the legal action on the preliminary issues in the test case we are continuing our detailed analysis of the terms and conditions of current account providers.
7. In the course of its work on the issue we have liaised closely with the Financial Services Authority and have also held discussions with the main banks.
8. The OFT has also been conducting a market study which is taking a wide-ranging look at whether the personal current account market is working well for consumers. In particular we will assess the extent to which consumers help drive competition. The OFT plans to publish our findings in the next few months having taken account of the implications of the judgment.
9. Further information on the background to the case can be found on the OFT's website. The FSA has also published guidance for consumers on its website http://www.moneymadeclear.gov.fsa.uk. The judgment can be found on the Courts website at http://www.judiciary.gov.uk/docs/judgments_guidance/oft_judgment_240408.pdf.
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