Bank charges
24 April 2008 update
On 24 April 2008, the High Court issued a preliminary judgement in the bank charges test case between seven banks plus the Nationwide and the Office of Fair Trading (OFT).
The Judge has decided that the OFT can apply consumer contract regulations to decide if overdraft charges are fair. The judge has however stressed that this decision does not mean that the terms imposed on customers by the Banks were unfair, or that they were not binding on consumers.
The full judgement is complex and banks and building societies are currently considering its full implications.
Further court hearings will be required before the test case is concluded. The next steps in the case will be decided by the court at a hearing which is likely to take place on 22 May 2008.
As agreed with the Financial Ombudsman Service and the FSA, the waiver regarding unauthorised overdraft charges will remain in place and complaints will continue to be kept on hold until the test case is concluded.
We will continue to keep customers informed and provide further updates as soon as any additional information becomes available.
Background
On 27 July 2007, the Office of Fair Trading (OFT) and a number of UK banks and a building society (the banks) started a court case to decide on the legality of unauthorised overdraft charges (that is, charges applied by the banks when customers seek to make payments for which they do not have available funds in the account and whose overdrafts have not been agreed in advance).
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.
1. What will happen to customer complaints about unauthorised overdraft charges?
Banks and building societies 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. Also see sections 5 and 6 below.
2. Why are the banks and building societies allowed to stop dealing with unauthorised overdraft charge complaints during the test case?
This follows application 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 a suspension of the obligations under the FSA's complaint handling rules while the banks sought legal certainty on this. The suspension is subject to a series of conditions designed to protect customers' rights. You can read the details here:
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.
3. 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.
4. Can I complain to the Financial Ombudsman Service about my bank charges?
Yes, you can make a complaint to FOS but it will not be reviewed while the test case is running. This is because the FOS will also await the outcome of the test case.
5. 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.
6. 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.
7. 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.
8. Where can I find out more?
You can contact us by calling us on 0845 602 3462.
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
