66/08    23 May 2008

At the Case Management Conference, the judge gave the Banks permission to appeal his finding that the relevant terms can be assessed for fairness under the UTCCRs. Also, four of the Banks were refused permission to appeal the judge's findings that some of their terms are not in plain intelligible language. The OFT is not appealing any of the judge's findings. All the parties are agreed that the appeal process should happen as quickly as possible and are working with the court to achieve this.

Mr Justice Smith's Judgment of 24 April 2008 relates to relevant terms in current agreements between the Banks and customers and is restricted to those terms that were considered by the court. There will be a further hearing on 7, 8 and 9 July 2008 to determine whether the relevant terms in the Banks basic and historic personal current account contracts can also be assessed for fairness under the UTCCRs and whether they are capable of being penalties at common law.

OFT is continuing with its investigation into the fairness of the relevant terms in the Banks current terms and conditions. During July, we aim to be in a position to begin engaging with the Banks in relation to our preliminary views on the question of fairness.

NOTES
 
1. In April 2007 the OFT announced its investigation into the fairness of terms relating to unarranged overdraft and returned item fees (referred to as 'unarranged overdraft charges'). This followed on from the OFT's initial review of such terms, where the OFT concluded that it shared the public concern about the level and incidence of bank current account charges.

2. In July 2007 the OFT entered into an agreement with the largest 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. This stage of the case was heard between 17 January and 8 February 2008, and dealt with certain preliminary issues of legal principle relating to whether the Unfair Terms in Consumer Contracts Regulations 1999 (UTCCRs) apply to the banks' various current terms and conditions and whether the charges are capable of amounting to penalties at common law.

3. In April 2008 the judge ruled that:

• the UTCCRs do apply to the banks' current T&Cs for unarranged overdraft charges
• the banks' current T&Cs are in plain intelligible language (PIL) except for Abbey, Barclays, Clydesdale and HBOS' T&Cs which are not in PIL in certain specific and minor respects, and 
• the banks' current T&Cs (and some historic T&Cs – that is, terms no longer in use) are not penalties at common law.

It is anticipated that Mr Justice Smith will be making an order to give effect to this Judgment next week.

The question of whether or not the T&Cs providing for the charges are actually unfair was not addressed in the stage 1A judgment (this is being addressed by our overall investigation and will be dealt with in stage 2 of the test case process).

4. The other parties to the test case are Abbey National plc, Barclays Bank plc, Clydesdale Bank plc, HBOS plc, HSBC Bank plc, Lloyds TSB Bank 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.

5. In the course of its work on the issue we have liaised closely with the Financial Services Authority and have also held discussions with the main banks.

6. The OFT has also been conducting a market study which is taking a wide-ranging look at whether the personal current account market is working well for consumers. In particular we will assess the extent to which consumers help drive competition. The OFT plans to publish our findings in the next few weeks.

7. Further information on the background to the case can be found on this website. The FSA has also published guidance for consumers on its website. Download the High Court judgment (pdf 652 kb).

8. Relevant Terms: Terms in standard form Personal Current Accounts between the bank and the customer that provide for unarranged overdraft charges.

9. Basic and Historic Personal Account Contracts: This includes certain non-mainstream current accounts also.