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Update on Unauthorised Overdraft Charges

What is happening?

In July 2007, the Office of Fair Trading (OFT) and a number of UK banks began a court case to decide on the legality of unauthorised personal overdraft charges.

This case is being called a 'test case' as the decision will clarify the law and is likely to apply to all existing and future claims against banks regarding unauthorised personal overdraft charges. 

To allow time for this case to progress and clarify the legal position, the Financial Service Authority (FSA) granted a "waiver" with regards to the handling by institutions of complaints with regards to such charges. 

The FSA has granted a new waiver, which replaces the existing one, which expired on 26^th July 2008. This new wavier will be in force until 29^th January 2009.

What will happen to customer complaints about bank charges?

 Like most banks and building societies we will not be dealing with or resolving customer complaints on overdraft charges while the test case is running.

If you do complain about your unauthorised 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 test case to all complaints we receive.

Why are banks allowed to stop dealing with bank charge complaints during the test case?

 The banks applied to the Financial Services Authority (FSA) for a suspension of the normal timetable for banks to deal with unauthorised overdraft charge complaints. The FSA decided that, in the circumstances it was appropriate to grant us a suspension of the banks' obligations under their complaint handling rules while the banks sought legal certainty on this issue. The conditions of the suspension are designed to ensure that customers are not disadvantaged by the suspension. You can read the form of the FSA suspension (direction) here: www.fsa.gov.uk

Can I complain to the Financial Ombudsman Service or make a court claim for a refund during the test case?

 Yes, you can make a complaint to FOS but it will not be reviewed while the test case is running. If you do complain to FOS, you will receive a letter explaining this.

The county courts have 'stayed' cases referred to them and the Financial Ombudsman Service has adopted a similar approach.

How long will the test case take?

 At this time we are unable to give any exact timescales for a conclusion to the 'test case'.

Where can I find out more?

 You can find more information through the following links:

 The British Bankers’ Association www.bba.org.uk

The Financial Service Authority www.fsa.gov.uk

The Office of Fair Trading: www.oft.gov.uk

The Financial Ombudsman Service: www.financial-ombudsman.org.uk