Bank Charges Test Case

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Bank Charges Test Case

On July 27, 2007 , the Office of Fair Trading (OFT) launched a High Court case against seven major UK banks to clarify whether or not unauthorised overdraft charges are legal.

The banks main argument was that the Unfair Terms in Consumer Contracts Regulations 1999 (UTCCR) did not apply to bank charges, but the OFT disagreed and so started the High Court test case.

Nine months later in April 2008, the High Court Judge ruled that the OFT could assess bank charges for fairness under these rules, much to the delight bank charges’ campaigners. However, all parties are still awaiting a final decision from the Judge on whether the charges are actually ‘unlawful’.

A verdict was expected to be announced in January 2009 but has now been postponed for at least another six months. The outcome of the test case will apply to all personal bank account claims in the UK , both new and pending ,

In the meantime, the Financial Services Authority (FSA) has granted all banks and building societies a “waiver”, which has allowed them to put all claims on hold until legal proceedings are brought to an end.

The waiver was first renewed on 22nd July 2008 and again on 22nd January 2009 for a further six months, meaning people’s claims will have been on hold for at least 18 months.

However, it is important that reclaimers do not wait until the test case is brought to an end before sending in their claim, as there are currently hundreds of thousands of people in the queue waiting for the FSA waiver to be lifted. Therefore, the sooner they make your claim, the less chance they have of being at the back of the queue to get their cash back.

It is also important to note that this waiver only applies to claims on bank charges on personal accounts and has not impact on credit card charge claims, and claims on Payment Protection Insurance (PPI) charges.

More information and the latest developments with the test case and the FSA waiver can be found by visiting the following websites:

• The Financial Services Authority (FSA) – www.fsa.gov.uk
• The Office of Fair Trading – www.oft.gov.uk
• The Financial Ombudsman Service – www.financial-ombudsman.org.uk

Court action and The Financial Ombudsmen Service

The Financial Ombudsmen Service* advised that it will not look at any cases until the Courts have made a Ruling on the bank charges test case. Furthermore, any cases currently being heard in the County Court have also been frozen until the High Court gives its verdict and the legal proceedings are brought to an end.

*The Financial Ombudsman Service (FOS) is a free and independent service created by the government to help settle disputes between financial companies and their customers.