Bank Charges - OFT Test Case

In late July, the Office of Fair Trading started a High Court action for a declaration on the application of the law in respect of unauthorised overdraft charges. Many local people have been seeking to reclaim what they regard as charges that were too high when they went overdrawn, in breach of their agreement with the bank, and incurred charges as a result. In some places, the courts have been overwhelmed with small claims being litigated and many banks have settled and repaid charges to customers. In the first half of the year £1 billion was paid back to customers and HSBC alone has refunded £116m. Whether they should have waited for a definitive court decision remains to be seen.

Matthew Bailey a partner says

”Tens of thousands of complaints that these charges are unfair have been received by the County Courts and the Financial Ombudsman Service. The banks do not accept that the unfairness rules of the Unfair Terms in Consumer Contract Regulations 1999 apply. The OFT believes that they do and is seeking to establish this legal principle clearly in the court. It would be helpful to have a binding precedent in this area of law rather than non-binding county court judgments and lots of ‘out of court’ settlements. The OFT is also undertaking a market study into personal current accounts, which addresses wider questions about competition and price transparency in the provision of personal current accounts. Banking did not used to be free in the UK. Some people will remember when every cheque was paid for by the customer. Those who do not overdraw their accounts unlawfully may find they pay for those in breach of contract if free banking goes as a result of the study.”

”If you need information on this area of law or even as a business are concerned about whether your own terms might breach the 1999 regulations, contact Matthew for advice on 01329 822333”