Statement on Bank Charges Test Case

[Legal Beagles]

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[Paule]

Re: Statement on Bank Charges Test Case

Statement on Bank Charges Test Case


The BBA said:

"The court has not said fees are unfair just that they can be looked at to see if they are fair or not. The banks continue to believe that the Regulations do not apply to these type of charges. The banks will apply to the House of Lords for permission to appeal the Court of Appeal's decision. The banks will work with the OFT to ensure the next stages in the test case process are progressed as quickly as possible."


Background Note

1. The Court of Appeal has today issued its judgment on the test case relating to unarranged overdraft charges. The test case process was initiated by the Banks and the OFT, to bring clarity to an issue which is of concern to a large number of bank customers.
2. The Banks had appealed Mr Justice Andrew Smith’s decision that their current terms and conditions were assessable for fairness under the Unfair Terms in Consumer Contracts Regulations 1999 (“UTCCRs”). His decision that the banks terms and conditions relating to unarranged overdraft charges were not capable of being penalties (except for one term relating to one bank) was not appealed.
3. The Court of Appeal has today ruled that the banks’ terms are assessable for fairness. The Court held that although the banks provide a service to customers when considering an unarranged overdraft and either providing an overdraft or returning the payment, the charges for these services are not an essential part of the bargain with customers when they open their account.
4. The judgment highlights the complex issues involved and the Court of Appeal said it reached its decision "not without hesitation". The banks will apply to the House of Lords for permission to appeal the Court of Appeal’s decision because:

• There is limited guidance from case law on whether and how the UTCCRs apply in these circumstances.
• The Banks continue to believe that the UTCCRs do not apply to these types of charges, where the customer is using and paying for a service that is being offered.
• The test case is of considerable public importance, as acknowledged by the Court of Appeal, so it is important for the issues to be fully tested.

5. The Banks remain committed to resolving, through the Courts, the legal issues concerning unarranged overdraft charges. The Banks and the OFT agreed that the case should move forward as quickly as possible and this has been achieved, with assistance from the Court. The Banks expect that the case will continue to progress as quickly as possible and will work with the OFT to achieve that.
6. Although the Court of Appeal found that the charges can be assessed for fairness under the UTCCRs, the Court did not consider whether the charges were actually unfair. That is a question that can only ultimately be decided by the Courts.
7. A further hearing or hearings will 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 the next phase.
8. 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.
9. Please refer to the BBA and individual Banks' websites for further information.