Office of Fair Trading
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OFT to focus investigation into unarranged overdraft charges on three banks
The OFT has announced that it is to streamline its investigation into unarranged overdraft charges by focusing on the terms of three banks in particular. The aim is to progress the case in the shortest and most efficient way possible.
The OFT believes that the terms of the three selected banks provide the best representative selection of all the banks' unarranged overdraft charging terms, and therefore the outcome of this more focused investigation will be relevant to the assessment of other banks' terms.
The investigation will concentrate initially on the charging terms of Lloyds TSB, HSBC and Clydesdale. The OFT has written to all the banks under investigation to outline this decision.
It should not be assumed that the OFT is more or less likely to find the terms of these banks' unfair than those of the other banks. The investigation into the other banks' terms is merely on hold and the OFT has stressed that no banks' terms have been given a clean bill of health.
The OFT expects to reach final conclusions on fairness later this year.
NOTES
1. The Unfair Terms in Consumer Contracts Regulations 1999 (UTCCRs) protect consumers against unfair standard terms in contracts they make with sellers and suppliers. The Office of Fair Trading, together with certain other bodies, can take legal action to prevent the use of such terms.
2. In April 2007, the OFT announced its investigation into the fairness of terms providing for unarranged overdraft and returned item fees (referred to as 'unarranged overdraft charges'). This followed on from the OFT's initial review of unarranged overdraft charges, after which the OFT concluded that it shared public concern about the level and incidence of such charges.
3. In July 2007, the OFT entered into an agreement with the largest retail 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.
4. In April 2008 the High Court gave a ruling, a key aspect of which confirmed the OFT's view that the OFT is entitled to assess the terms for fairness. The banks appealed this finding by the High Court to the Court of Appeal.
5. In August 2008, the OFT wrote to the eight banks setting out our approach to the assessment of fairness and, for seven of them, our concerns about their particular terms. This included a provisional view on the unfairness of particular terms and conditions that impose charges.
6. In February 2009 the Court of Appeal's judgment confirmed that the OFT is entitled to assess unarranged overdraft charging terms for personal current accounts for fairness.
7. The banks that are parties to the test case are Abbey National plc, Barclays Bank plc, Clydesdale Bank plc, HBOS plc, HSBC Bank plc, Lloyds Banking Group 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.
8. In July 2008, the OFT published a market study which concluded that the personal current account market is not working well for consumers and that there were specific concerns about the charging structure. http://www.oft.gov.uk/advice_and_resources/resource_base/market-studies/current/personal/pca
9. In the course of its work on the issue the OFT has liaised closely with the Financial Services Authority.
PUBLIC enquiries: 0845 7224499 enquiries@oft.gov.uk
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