The Court of Appeal has published its judgment on the test case relating to unarranged overdraft charges. The test case was initiated by a number of UK banks and the Office of Fair Trading (OFT), to bring clarity to an issue which is of concern to a large number of bank customers.

The banks had appealed an earlier decision that their current terms and conditions were assessable for fairness under the Unfair Terms in Consumer Contracts Regulations 1999 (UTCCRs).

The Court of Appeal has found that the charges can be assessed for fairness under the UTCCRs. However, the Court of Appeal did not consider whether the charges were actually fair. The banks will apply to the House of Lords for permission to appeal the Court of Appeal’s decision.

As agreed with the FSA and Financial Ombudsman Service, customer complaints relating to unarranged overdraft charges will remain on hold.

The British Bankers Association (BBA) has published a press statement on the Court of Appeal decision in which it states:

“The court has not said fees are unfair just that they can be looked at to see if they are fair or not. The banks continue to believe that the Regulations do not apply to these type of charges. The banks' aim throughout this process has been and remains to achieve clarity and certainty for customers. The banks will apply to the House of Lords for permission to appeal the Court of Appeal’s decision. The banks will work with the OFT to ensure the next stages in the test case process are progressed as quickly as possible.”

View (1) Abbey National plc, (2) Barclays Bank plc (3) Clydesdale Bank plc, (4) HBOS plc, (5) HSBC Bank plc, (6) Lloyds TSB Bank plc, (7) Nationwide Building Society, (8) The Royal Bank of Scotland group plc v The Office of Fair Trading, February 2009

View BBA Statement on Bank Charges Test Case, 26 February 2009