Update 8 October 2008

On 27 July 2007, the Office of Fair Trading (OFT) and seven UK banks and a building society started a court case to decide on the legality of unauthorised overdraft charges.

On 24 April 2008, the Court issued its judgment on the first stage of the test case process.

The full judgment is available at: www.judiciary.gov.uk/docs/judgments_guidance/oft_judgment_240408.pdf

In summary, the judgment decided that the bank's current terms and conditions that relate to these fees are not 'penalty charges', that these terms are in ‘plain and intelligible’ language, or substantially so, and that unauthorised overdrafts are part of the essential services banks provide to their personal account holders. The court also considered the terms could be assessed by the OFT for fairness but that did not mean that the charges were unfair. On 22 and 23 May 2008 a procedural hearing (known as a Case Management Conference) took place. Various next steps in the test case process were decided at the hearing.

Firstly, the Court dealt with the issue of appeals. The Court gave permission to the Banks to appeal April’s Court judgment that unauthorised overdraft fees are assessable for fairness under the Unfair Terms in Consumer Contracts Regulations 1999 (“UTCCRs”). The Banks are appealing on this issue as they continue to believe that the fees are fair and that the UTCCRs do not apply to these types of fees. 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 OFT is not seeking permission to appeal the April judgment. Secondly, it was confirmed that there will be another hearing where the Court will be asked to consider whether terms and conditions previously used by the Banks are capable of being penalties.

A hearing took place on 7 to 9 July 2008 and the Court issued its judgment on 8 October 2008. The judge found that most of the historic terms are not capable of being penalties, although there were some terms he found he could not make a ruling on. The judge will hear further submissions at a later date. The judge also decided that the banks’ historic terms can be assessed for fairness under the Regulations. This is in line with his decision in April on the banks' current terms (although the banks have appealed the April decision and a hearing has been scheduled to begin in the Court of Appeal on 28 October 2008). As previously agreed with the Financial Ombudsman Service and the FSA, customer complaints relating to unauthorised overdraft charges will currently remain on hold. The Banks will continue to ask Courts to keep cases relating to unauthorised overdraft charges on hold until the test case process is concluded.

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.

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.

Can I complain to the Financial Ombudsman Service about my unarranged overdraft bank charges?
Yes, you can make a complaint but it will not be reviewed while the test case is running.
The Financial Ombudsman Service (FOS) has decided not to review complaints while the test case is running. If you do complain to FOS, they will respond to you confirming their position directly.

How long will the 'test case' take?
At this time it is too soon to give any exact timescale for a conclusion to the 'test case' but the banks and the OFT have agreed that the appeal should happen as quickly as possible. The date of the hearing depends on the Court’s timetable but we hope it will be before the end of 2008.

Where can I find out more?
As things progress we will update the information on our website airdriesavingsbank.com or you can contact your branch.

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

Email Us at: info@airdriesavingsbank.com