Seven banks and one building society (the "Banks") are engaged in a High Court test case with the Office of Fair Trading ("OFT") to decide the legality of unarranged overdraft charges. The first stage of the test case process was heard by the Court between 17 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. The Court decided that the unarranged overdraft charges that it examined cannot be penalties, but that they can be assessed for fairness under the Unfair Terms in Consumer Contract Regulations 1999 ("UTCCRs").
The Banks are appealing the first stage judgment on the question of whether the unarranged overdraft charges examined by the Court in January can be assessed for fairness. The Court hearing on this is due to start in the Court of Appeal on Tuesday 28 October 2008 and is expected to continue on 29 October and 3 to 6 November 2008. During the hearing, the Court of Appeal will not examine whether or not the terms are unfair. Subject to the outcome of the appeal, that will be decided by the Court in due course.
The Banks are appealing on this issue as they continue to believe that unarranged overdraft charges are fair and that the fairness test in the UTCCRs does not apply to these types of charges. There is limited guidance from case law on whether and how the UTCCRs apply in these circumstances and as the test case process is of considerable public interest, it is important for the issues to be fully tested.
The Court of Appeal will give its Judgment some time after the Court hearing although it is not possible to confirm when this will be. We will update you about what is decided as soon as possible but further Court hearings will be required before the test case process is concluded.
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.