High Court finds in favour of OFT in bank charges test case

United Kingdom

The High Court has today held that the Office of Fair Trading (“OFT”) has succeeded in establishing that Banks’ terms and conditions which impose charges on their customers for unauthorised overdrafts are subject to the test of fairness contained in the Unfair Terms in Consumer Contracts Regulations 1999 (“UTCCR”).

Following 14 days of High Court hearings, Mr Justice Andrew Smith today handed down his long awaited judgment in the High Court test case brought by the OFT against seven banks and one building society (Office of Fair Trading -v- Abbey National plc and 7 Others).

Importantly, the Court accepted the Banks’ submissions that none of the relevant terms in the contracts imposing these charges amounted to a penalty under common law.

Today’s decision is only on preliminary issues, and does not amount to a finding that the charges are not fair, but means that the OFT will now be entitled to continue with its investigations into the fairness of the charges under the UTCCR.

It is anticipated that this decision will almost certainly be appealed, and the parties have been ordered to inform the Court by 22nd May whether they wish to appeal any parts of the judgment.

In the meantime, the Judge commented that whilst it was not a matter for him, the reasons for putting the pending County Court cases on hold remained the same, at least until the next High Court hearing, and probably beyond.

The OFT now plans to analyse the implications of the judgment for its investigation into the fairness of the charges.

A further analysis of the rationale of the judgment to follow.