Q: What is happening?
On 27 July 2007, the Office of Fair Trading (OFT), 7 UK banks (including HBOS and Lloyds TSB) and Nationwide Building Society, started a court case to decide on the legality of unarranged overdraft charges.
The case has been called a "test case" because the decision will clarify the law in this area. It is likely to apply to all current and new claims against current account providers about unarranged overdraft charges.
We believe that unarranged overdraft fees are fair and that they reflect the service our customers receive. It is important for everyone that we have legal certainty over unarranged overdraft charges.
The first step in this process was a trial of 'preliminary' issues in relation to the terms and conditions used by the banks at that time. This step concluded on 8 February 2008.
On 24 April 2008, the Court issued its judgment on the first stage of the test case process. It decided that the banks' current charges can’t be penalties, but that they can be assessed for fairness under the Unfair Terms in Consumer Contract Regulations 1999 ("UTCCRs"). The banks appealed this first stage judgment at a hearing before the Court of Appeal which concluded on 5 November 2008.
Following further hearings, the Court also decided that HBOS’ and Lloyds TSB’s historic terms and conditions can’t be penalties, but like the banks’ current charges they can be assessed for fairness.
On 26 February 2009, the Court of Appeal held that the banks' charges can be assessed for fairness. The banks appealed this judgment to the House of Lords at a hearing which concluded on 25 June 2009. We expect the outcome of this decision to be published by the new Supreme Court on 25 November 2009.
As previously agreed with the Financial Services Authority (FSA) and the Financial Ombudsman Service, customer complaints relating to unarranged overdraft charges will currently remain on hold. The banks will continue to ask County (England and Wales) and Sheriff (Scotland) Courts to keep cases relating to unarranged overdraft charges on hold until the test case process is concluded.
On 3 April 2009 the OFT announced the next stage in their ongoing investigation into unarranged overdraft charges. The OFT believe that by looking at a representative sample of bank terms and conditions, the investigation process will be streamlined and shortened.
What happens next?
The Supreme Court’s decision is expected on 25 November 2009. We will not know the content of the judgment until this time and so we are unable to comment on the outcome at this stage.
We will continue to post updates on our website to keep you up to date about the progress of the test case.
For customers who have a complaint on hold, we will write to them once the judgment has been received to explain what this means for them and what will happen next.
Until the test case process is concluded, customer complaints relating to unarranged overdraft charges will continue to remain on hold. We will also ask County and Sheriff Courts to keep legal cases relating to unplanned overdraft charges on hold until that time.
How long will the test case take?
At this stage, we can’t confirm when the test case will be concluded. However, the banks are working closely with the OFT and the Courts to bring a conclusion to the test case as soon as possible.
What will happen to customer complaints about unarranged overdraft charges?
Customer complaints relating to unarranged overdraft charges will currently remain on hold while the test case is ongoing. Banks and building societies will not be dealing with or resolving customer complaints about unarranged overdraft charges while our agreement with the FSA and Financial Ombudsman Service stays in place.
If you make a complaint about your unarranged overdraft charges, we will write to tell you that we have received your complaint and that we will record it on your file. When a final decision is reached in the test case, we will contact you as soon as possible to tell you how we will resolve your complaint. We will apply the decision in the court case to all complaints we receive. Please let us assure you that none of our customers who have raised concerns about unarranged overdraft charges will be disadvantaged by this legal process.
Why are the banks allowed to stop dealing with unarranged overdraft charges complaints during the test case?
In July 2007, Halifax, Bank Of Scotland, Lloyds TSB and other banks, applied to the FSA for a suspension of the normal timetable for dealing with unarranged overdraft charge complaints. The FSA decided that it was appropriate to grant us a suspension of our obligations under the FSA complaint handling rules while we seek legal certainty about these fees. The FSA has granted a further extension until 26 January 2010 and is subject to a series of conditions so that customers are not disadvantaged by the legal process. Details of the FSA agreement can be found on their website: www.fsa.gov.uk.
Can I make a court claim for a refund during the test case?
Yes, but in line with other banks, we will apply to the court to put your case on hold while the test case is running. This is because the issues being raised in customer complaints about unarranged overdraft charges are being considered in the test case.
Can I complain to the Financial Ombudsman Service about my unarranged overdraft charges?
Yes, but the Financial Ombudsman Service (FOS) has decided not to review complaints about unarranged overdraft charges while the test case is running. If you do complain to FOS, you will receive a letter explaining this and letting you know what will happen.
How can you continue to charge what you do for these services when there is legal challenge?
We believe that our current account fees and charges are clear and represent a fair charge for a banking service that is valued by our customers. That is why we are working with the other major UK banks and the OFT to obtain certainty through legal proceedings, which we believe will clarify the law in this area.
I live in/have an account in Scotland, how does this affect me?
If you choose to raise a claim against the bank in the Scottish Courts we will apply to the Court to put your action on hold until the resolution of the bank's legal proceedings with the OFT.
If you choose not to make a claim in the Scottish Courts now, you should be aware that under Scots Law the timing of when you raise a claim against us may be important. Because of this you may want to get independent legal advice about this.
Where can I find more information?
You can contact:
Lloyds TSB by calling 0845 3 000 000
Halifax/Bank of Scotland by calling 08457 20 30 40
Intelligent Finance by calling 0845 609 4343
Or you can find out more at the following websites:
www.halifax.co.uk
www.bankofscotland.co.uk
www.if.com
The Financial Services Authority:
www.fsa.gov.uk
The Office of Fair Trading:
www.oft.gov.uk
The Financial Ombudsman Service:
www.financial-ombudsman.co.uk
