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The Office of Fair Trading: OFT welcomes Court of Appeal judgment
21/09 26 February 2009
The OFT welcomes the Court of Appeal's very clear confirmation today that the unarranged overdraft charging terms for personal current accounts can be assessed for fairness.
The Court found that these terms are not part of the core or essential bargain between a consumer and their bank, and therefore consumers do have protection under the Unfair Terms in Consumer Contract Regulations (UTCCRs) for these terms.
This judgment confirms the OFT's long-held interpretation of this important aspect of consumer law, and is one that consumers themselves would identify with. It is also relevant to businesses across the whole economy.
We are now analysing the implications of the judgment for our ongoing investigation. The OFT has already written to the banks with its provisional view on the fairness of the terms, setting out its concerns that they may be unfair. We expect to reach a final decision on fairness later this year.
NOTES
1. The Unfair Terms in Consumer Contracts Regulations 1999 (UTCCRs) protect consumers against unfair standard terms in contracts they make with traders. The Office of Fair Trading, together with certain other bodies, can take legal action to prevent the use of such terms.
2. In April 2007, the OFT announced its investigation into the fairness of terms providing for unarranged overdraft and returned item fees (referred to as 'unarranged overdraft charges'). This followed on from the OFT's initial review of unarranged overdraft charges, where the OFT concluded that it shared public concern about the level and incidence of such charges.
3. In July 2007, the OFT entered into an agreement with the largest retail current account providers in relation to bringing a test case in order to ensure an orderly and timely resolution of the legal issues associated with its investigation.
4. In April 2008 the High Court gave a ruling, the key aspect of which confirmed the OFT's view that the terms can be assessed for fairness. The banks appealed this finding by the High Court to the Court of Appeal.
5. In August 2008, we wrote to the eight banks setting out our approach to the assessment of fairness and, for seven of them, our concerns about their particular terms. This included a provisional view on the unfairness of particular terms and conditions that impose charges. At this stage, no bank's terms have been given a clean bill of health and all banks remain under investigation.
6. The other parties to the test case are Abbey National plc, Barclays Bank plc, Clydesdale Bank plc, HSBC Bank plc, Lloyds Banking Group plc, Royal Bank of Scotland Group plc, and Nationwide Building Society. Together these current account providers account for about 90 per cent of personal current accounts in the UK.
7. In the course of its work on the issue the OFT has liaised closely with the Financial Services Authority.
8. In July 2008, the OFT published a market study which concluded that the personal current account market is not working well for consumers including specific concerns about the charge structure.
21/09 26 February 2009
The OFT welcomes the Court of Appeal's very clear confirmation today that the unarranged overdraft charging terms for personal current accounts can be assessed for fairness.
The Court found that these terms are not part of the core or essential bargain between a consumer and their bank, and therefore consumers do have protection under the Unfair Terms in Consumer Contract Regulations (UTCCRs) for these terms.
This judgment confirms the OFT's long-held interpretation of this important aspect of consumer law, and is one that consumers themselves would identify with. It is also relevant to businesses across the whole economy.
We are now analysing the implications of the judgment for our ongoing investigation. The OFT has already written to the banks with its provisional view on the fairness of the terms, setting out its concerns that they may be unfair. We expect to reach a final decision on fairness later this year.
NOTES
1. The Unfair Terms in Consumer Contracts Regulations 1999 (UTCCRs) protect consumers against unfair standard terms in contracts they make with traders. The Office of Fair Trading, together with certain other bodies, can take legal action to prevent the use of such terms.
2. In April 2007, the OFT announced its investigation into the fairness of terms providing for unarranged overdraft and returned item fees (referred to as 'unarranged overdraft charges'). This followed on from the OFT's initial review of unarranged overdraft charges, where the OFT concluded that it shared public concern about the level and incidence of such charges.
3. In July 2007, the OFT entered into an agreement with the largest retail current account providers in relation to bringing a test case in order to ensure an orderly and timely resolution of the legal issues associated with its investigation.
4. In April 2008 the High Court gave a ruling, the key aspect of which confirmed the OFT's view that the terms can be assessed for fairness. The banks appealed this finding by the High Court to the Court of Appeal.
5. In August 2008, we wrote to the eight banks setting out our approach to the assessment of fairness and, for seven of them, our concerns about their particular terms. This included a provisional view on the unfairness of particular terms and conditions that impose charges. At this stage, no bank's terms have been given a clean bill of health and all banks remain under investigation.
6. The other parties to the test case are Abbey National plc, Barclays Bank plc, Clydesdale Bank plc, HSBC Bank plc, Lloyds Banking Group plc, Royal Bank of Scotland Group plc, and Nationwide Building Society. Together these current account providers account for about 90 per cent of personal current accounts in the UK.
7. In the course of its work on the issue the OFT has liaised closely with the Financial Services Authority.
8. In July 2008, the OFT published a market study which concluded that the personal current account market is not working well for consumers including specific concerns about the charge structure.
