On 25 November 2009, the Supreme Court overturned the decisions of the High Court and Court of Appeal which had held that the Office of Fair Trading (OFT) was entitled to investigate the fairness of bank charges imposed on customers who went beyond their overdraft limit without authorisation. The decision was such an unexpected blow to the OFT that it has since announced that it has discontinued its investigation into the fairness of such charges.

As we reported in the August 2009 edition of the Commercial Litigation Review View>>, the case of Office of Fair Trading v Abbey National Plc & Ors [2008] EWHC 875 (Comm) concerns the charges imposed by banks when their current account customers went into unauthorised overdraft. Both the High Court and the Court of Appeal had held that the OFT was entitled to assess the fairness of the charges. Both of the lower courts held that the charges were not core to the contract between bank and customer but were merely peripheral and, as such, the assessment of their fairness was not excluded by the Unfair Terms in Consumer Contract Regulations 1999 (the Regulations).

According to the OFT, 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". It had been hoped by many campaigners that an important precedent had been set that would enable large numbers of banking customers to recover the charges they had paid out. Many claims relating to those charges had already been brought against the banks but had been stayed awaiting the decision in this case.

The Decision

However, the Supreme Court did not agree with the decisions of the lower courts. Although it acknowledged that its decision was likely to cause great disappointment amongst campaigners and the banks' customers, it held that the OFT was not entitled to assess the fairness of the charges, being excluded by the Regulations. It arrived at this decision having concluded that the charges were in fact part of the price paid by the customer for the package of services provided by the bank under their contract and, as such, were a core or essential part of the bargain.

The Court refused the OFT permission to appeal the matter to the European Court of Justice. However, in handing down its decision, it suggested that this may not be the end of the campaign against the fairness of the charges hinting that there may be other avenues open to the OFT by which it could challenge the charges.

The Reaction

Having considered the judgment and the options open to it, the OFT announced on 22 December 2009 that that it had decided against taking its investigation forward. It had concluded that a continued investigation would have very limited scope and low prospects of success.

However, the OFT did state that it continues to have "significant concerns about the operation of the market for personal current accounts" and that it is in discussions with banks, consumer groups and other organisations about the issues. It is aiming to report on the progress of these talks by the end of March. At the time of writing, no report has been produced.

The banks, perhaps wary of the significant adverse public opinion in relation to the matter, were reluctant to call the result a victory instead referring to it as a "clarification of the law". They may also have been acutely aware of campaigners outside of the OFT that have stated that the decision is nothing more than a setback and that they will continue their fight against the charges.


This decision is clearly a blow for campaigners against these types of bank charges and seems to have been compounded by the OFT's decision not to progress with a further investigation. But is this the end of the road? It would seem perhaps that it is not. Campaigners march on and the OFT continues its work through different means ranging from voluntary action by the banks to legislative change.

With public opinion seemingly unwavering, it may yet be that the banks feel compelled to listen to the opposition purely from a commercial standpoint and it remains to be seen what success individual claimants may have.