Judgment on next stage of OFT Test Case

Today (8 October 2008), the High Court delivered its judgement on the current stage of the test case on unarranged overdraft charges. The Case is between seven banks and one building society with the Office of Fair Trading. This stage considered the terms & conditions previously used by them, and whether they were capable of being penalties under common law.

The Court found that Clydesdale and Yorkshire Banks’ charges levied under previously used terms & conditions are incapable of being penalties.

Further Court hearings will be required before the test case process is concluded. This will include an appeal of the first stage judgment by the Banks and the building society, on the question of whether the current charges can be assessed for fairness. This commences on 28 October 2008.

As previously agreed with the FSA and the Financial Ombudsman Service, customer complaints relating to unarranged overdraft charges will currently remain on hold. The Banks and the building society will continue to ask County and Sheriff Courts to keep cases relating to unarranged overdraft charges on hold until the test case process is concluded.

Please refer to the British Bankers Association website (opens in a new window) for further information.

Editors Notes

Seven banks and one building society are currently engaged in a High Court test case with the Office of Fair Trading to decide the legality of unarranged 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 in relation to the terms and conditions used by the Banks at that time. On 24 April 2008 the Court issued its judgment on this first stage of the test case process. It decided that the current charges cannot be penalties, but that they can be assessed for fairness.