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Update on OFT Court Case


  1. Seven banks and one building society (the "Banks") are engaged in a test case with the Office of Fair Trading ("OFT") to decide the legality of unarranged overdraft charges and to bring clarity to an issue which is of concern to a large number of bank customers.
  2. So far there have been two substantive hearings before the Commercial Court.  The first, in January and February 2008, dealt with the Banks' then current terms and conditions.  The second, in July 2008, dealt with the Banks' historic terms and conditions. 
  3. The Commercial Court decided (in judgments given on 24 April and 10 October 2008) that the unarranged overdraft charges that it examined could not be penalties, but that they could be assessed for fairness under the Unfair Terms in Consumer Contract Regulations 1999 ("UTCCRs").
  4. The Bank is pleased that the OFT did not appeal the Commercial Court's decision in relation to penalties. 
  5. The Banks appealed the Commercial Court's decision on the question of whether the unarranged overdraft charges examined by the Commercial Court could be assessed for fairness.  The appeal was heard by the Court of Appeal on 28, 29 October and 4 – 6 November 2008. 
  6.  The Court of Appeal has given judgment on the Banks' appeal today.  The Court of Appeal's judgment is a further illustration of how complex the legal issues are. 
  7. The Court of Appeal has, with some hesitation, upheld the Commercial Court's judgment that the Banks’ current terms and conditions relating to unarranged overdraft charges can be assessed for fairness under the UTCCRs.
  8. The Court of Appeal also accepted the Commercial Court's finding that unarranged overdrafts are one of the essential, real and identifiable services which the Banks provide to their personal current account customers.
  9. It is important to note that the Court of Appeal's decision does not mean that the Bank's terms and conditions relating to unarranged overdraft charges are unfair, only that the OFT can assess the terms and conditions for fairness.
  10. A further hearing or hearings will now be required in order for the Court to determine the issue of fairness.  The Banks believe their charges are fair and that the charges will therefore be upheld by the Court at this next phase. 
  11. Given the importance of the test case, the Bank will apply to the House of Lords for permission to appeal the Court of Appeal’s judgment.
  12. The Banks and the OFT agreed at the beginning of the test case process that the case should move forward as quickly as possible.  This has been achieved to date with assistance from the Commercial Court and the Court of Appeal.  The Banks are keen that all outstanding issues should be resolved as expeditiously as possible and will continue to work with the OFT to agree appropriate next steps.
  13. As previously agreed with the Financial Ombudsman Service and FSA, customer complaints relating to unarranged overdraft charges will remain on hold.  The Court of Appeal has recommended that County and Sheriff Court cases relating to unarranged overdraft charges should remain on hold.

Further information, when available, will be posted on the BBA website (

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