OFFICE OF FAIR
TRADING News Release (55/08) issued by The Government News Network
on 24 April 2008
The High Court has
today confirmed the OFT's view that personal current account
unarranged overdraft charges can be assessed for
fairness.
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.
NOTES
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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