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Press releases 2009 -

OFT announces decision and next steps on bank charges

144/09    22 December 2009

Following the Supreme Court's judgment last month, the OFT has today announced its next steps in securing changes to unarranged overdraft charges and the wider personal current account market.

The Supreme Court found that unarranged overdraft charging terms in the contracts considered are not assessable in full under the Unfair Terms in Consumer Contract Regulations 1999 ('UTCCRs').

After detailed consideration of the judgment and of the various options available to it, the OFT has concluded that any investigation it were to continue into the fairness of current unarranged overdraft charging terms under the UTCCRs would have a very limited scope and low prospects of success. Given this, it has decided against taking forward such an investigation.

The OFT nevertheless continues to have significant concerns about the operation of the market for personal current accounts. Despite some recent and planned improvements by banks, particularly around transparency and customer switching, it believes fundamental changes are still required for the market to work in the best interests of bank customers. Banks earn around a third of their personal current account revenues from unarranged overdraft charges that are difficult to understand, not transparent and not subject to effective consumer control.

A number of options are available to secure the changes that the OFT wants to see, ranging from voluntary action to legislative change. The OFT will now discuss these issues intensively with banks, consumer groups and other organisations, with the aim of reporting on progress by the end of March 2010.

The OFT's decision not to continue its investigation into banks' unarranged overdraft charging terms under the UTCCRs as a result of the Supreme Court judgment followed extensive consideration of the issues including discussions with consumer groups, campaigners, banks, the Government, the Financial Services Authority and Financial Ombudsman Service.

Consumers with complaints about bank charges should look at advice available from the FSA and FOS on their websites.

John Fingleton, OFT Chief Executive, said:

'The Supreme Court judgment was not the outcome we had hoped for and was disappointing for many bank customers.

'Having now considered in detail all the options available to us in light of the judgment, we have decided not to continue what would be a narrow investigation with limited prospects of success.

'But we remain deeply concerned that the market for personal current accounts is not working well for consumers and does not give banks sufficient incentives to compete.

'We are committed to securing significant changes to unarranged overdraft charges going forward, whether through voluntary agreement with the banks or by other means. Customers can play their part by looking for value for money and switching accounts if necessary.'


1. Download a document setting out the reasons for the OFT's decision (pdf 135kb).

2.  The OFT announced an investigation under the UTCCRs into the fairness of terms for unarranged overdraft charges in March 2007. It agreed to bring a test case with seven banks and one building society - Abbey National plc, Barclays Bank plc, Clydesdale Bank plc, HSBC Bank plc, Lloyds Banking Group plc (including HBOS), Royal Bank of Scotland Group plc and Nationwide Building Society - on whether the terms of unarranged overdraft charges are exempt from an assessment of fairness under the UTCCRs, with a litigation agreement requiring each side to bear their own costs. The High Court and Court of Appeal found in favour of the OFT and found that the terms did not fall within the exemption. The Supreme Court on 27 November overturned these previous judgments. For more information on the investigation see Personal banking - current accounts.

3. The OFT published its market study into Personal Current Accounts in July 2008 and published a follow-up report in October 2009. For more information see Personal banking - current accounts.

4. Consumers with complaints about bank charges should visit the FSA website and FOS website for more information.

5. On 9 December 2009, in its Pre-Budget Report, the government noted that it "will take action to deliver change if a voluntary approach does not result in a fair outcome for consumers." (p.57). HM Treasury website.


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