banking

update 25 April 2008

what is happening?
On the 24 April 2008, judgment was delivered on the first part of the test case process to decide the legality of unauthorised personal overdraft charges. The judge decided (subject to appeals) that;

• our current terms are sufficiently clear to enable the typical consumer to have a proper understanding of them for sensible and practical purposes
• our current overdraft charges are assessable for fairness under the Unfair Terms in Consumer Contracts Regulations 1999 ("UTCCR's"). Whether our charges are fair or not will be determined by the Court at a later hearing.
• unplanned overdrafts are one of the essential services which we provide to our current account customers
• our current overdraft charges are not unenforceable penalties.

A full copy of the judgment is available at www.judiciary.gov.uk

What is our stance on the test case process?
We are pleased that the judge agreed that our current charges are not unenforceable penalties and our terms are in plain intelligible language. We believe that the same analysis will apply to charges under our historic terms, which are yet to be decided. We remain committed to resolving, through the Court, the legal issues concerning overdraft charges. The judgment illustrates how complex those issues are. We expect that the case will continue to progress as quickly as possible and will work with the Office of Fair Trading (OFT) to achieve that.

What will happen next?
Further hearings will be required before the test case process is concluded. The likely timetable will be decided at a hearing on 22 May. It is agreed with the OFT that the case should move forward as quickly as possible.

What will happen to customer complaints about overdraft charges?
As previously agreed with the Financial Ombudsman Service and the Financial Services Authority (FSA), customer complaints relating to overdraft charges will remain on hold until the test case process is concluded.

If you do complain about your overdraft charges, we will acknowledge your complaint and 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 test case to all complaints we receive.

Why are we allowed to stop dealing with overdraft charges complaints during the test case?
We and the other banks applied to the FSA for a suspension of the normal timetable for dealing with overdraft charges complaints. The FSA decided that it was appropriate to grant a suspension while the banks sought legal certainty on this issue. The conditions of the suspension are designed to ensure that customers are not disadvantaged in any way. You can read the form of the FSA suspension (direction) here: www.fsa.gov.uk 

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 overdraft charges are being considered in the test case process.

Can I complain to the Financial Ombudsman Service about my overdraft charges?
Yes, you can make a complaint to FOS but they have indicated that complaints will not be reviewed while the test case is running. If you do complain to FOS, you will receive a letter explaining this.

I am in financial difficulty what can I do?
If you have financial problems please contact us and we will try to help you solve them. There are a number of options available which we will discuss with you or your chosen financial advisor.

What is the background to this test case?
On 27 July 2007, the OFT, HSBC and six other UK banks and a building society started a test case to decide on the legality of unauthorised personal overdraft charges. Together, these banks provide more than 93% of current accounts in the UK.

The first part of the test case process was heard by the Court between 17 January and 8 February 2008. It dealt with certain preliminary issues of legal principle which included whether the UTCCR's apply to overdraft charges and whether overdraft charges can be penalties.

where can I find out more?
You can find more information through the following links:

The British Bankers' Association 

The Financial Service Authority 

The Office of Fair Trading 

The Financial Ombudsman Service