Unauthorised overdraft charges
Test Case
Current account charges – judgement on first stage of OFT test case
Seven banks and Nationwide building society are engaged in a High Court test case with the Office of Fair Trading (OFT) to decide the legality of unauthorised overdraft charges. The first stage of the test case process was heard by the Court between 16 January and 8 February 2008, and dealt with certain preliminary issues of legal principle.
On Thursday 24 April 2008, the Court issued its judgement on this first stage of the test case process. The judgement is complex and we and the banks are currently considering its implications.
Further Court hearings will be required before the test case process is concluded. The likely timetable for the next steps in the test case process will be decided by the Court at a procedural hearing which will take place on 22 May 2008.
As previously agreed with the Financial Ombudsman Service and the FSA, customer complaints relating to unauthorised overdraft charges will currently remain on hold. We and the banks will continue to ask County and Sheriff Courts to keep cases relating to unauthorised overdraft charges on hold until the test case process is concluded.
Please refer to the British Bankers' Association (BBA) or the Financial Services Authority (FSA) websites for further information. We will update our website once more guidance is available.
What is happening?
On 27th July, the Office of Fair Trading (OFT) and a number of UK banks and a building society* started a court case to decide on the legality of unauthorised overdraft charges. Together, these banks and the building society provide more than 80% of current accounts in the UK. This case is being called a “test case” because the decision will clarify the law in this area and is likely to apply to all current and new claims against current account providers about unauthorised overdraft charges.
We will continue to post updates on our website to keep customers informed of progress on the test case as this could run for at least a year.
What will happen to customer complaints about unauthorised overdraft charges?
We will not be dealing with or resolving customer complaints on unauthorised overdraft charges while the test case is running. If you do complain about your unauthorised overdraft charges, we will write to tell you that we have received your complaint and that we will record it on your file. When a final decision is reached in the test case, we will contact you as soon as possible to tell you how we will resolve your complaint. We will apply the decision in the court case to all complaints we receive.
Why are you allowed to stop dealing with unauthorised overdraft charge complaints during the test case?
We applied to the Financial Services Authority (FSA) for a suspension of the normal timetable for dealing with unauthorised overdraft charge complaints. The FSA decided that, in the circumstances, it was appropriate to grant us a suspension of our obligations under the FSA's complaint handling rules whilst legal certainty is sought on this issue (which is now affecting more than 100,000 UK customers). The suspension is subject to a series of conditions designed to protect customers’ rights. You can read the form of the FSA suspension (direction) here: www.fsa.gov.uk
All customers who have made a written complaint on unauthorised overdraft charges but who have not yet had their complaint resolved will receive a letter to explain the position with respect to their complaint.
Can I make a court claim for a refund during the test case?
Yes, but we will apply to the court to put your case on hold while the test case is running. This is because the issues being raised in customer complaints on unauthorised overdraft charges are being considered in the test case.
Can I complain to the Financial Ombudsman Service about my bank charges?
The Financial Ombudsman Service (FOS) has decided not to review complaints while the test case is running. If you do complain to FOS, you will receive a letter explaining that.
What if I have already been made an offer?
We will stand by any offer to settle a complaint or court claim that we have already made to our customers. If you have received an offer to settle from us, we will be writing to you again shortly. Our letter will explain that customers have two months to decide whether to refuse our offer and wait for the decision in the test case. If you do choose to refuse an offer, your complaint or claim will be held and recorded by us until there is a final decision in the test case. We will then contact you again as soon as possible to finally resolve your complaint.
I have already accepted an offer from you. Will my claim be revisited?
If you have accepted a 'full and final settlement', we believe it unlikely you would be awarded a further sum even if the test case indicates a potentially larger amount. However, this does not preclude you from asking for repayment of any new charges incurred if the courts find they are unlawful.
How long will the test case take?
At this time it is too soon to give any exact timescales for a conclusion to the test case but it could go for more than a year. The banks have agreed with the OFT and the FSA to conduct the test case in an efficient, prompt and orderly way.
Where can I find out more?
You can contact us through your branch or by calling us on 0845 300 2511
Alternatively, you can find more information through the following links:
The Financial Service Authority
www.fsa.gov.uk
The Office of Fair Trading:
www.oft.gov.uk
The Financial Ombudsman Service:
www.financial-ombudsman.org.uk
*The following are parties to the agreement with OFT for the test case:
Abbey National plc
Barclays Bank plc
Clydesdale Bank plc
HBOS plc
HSBC Bank plc
Lloyds TSB Bank plc
Nationwide Building Society
Royal Bank of Scotland Group plc