Northern Bank is providing the following update to its customers regarding the ongoing legal proceedings between some banks, (“the Banks”) and the Office of Fair Trading (OFT) regarding a complaint about unarranged (unauthorised) overdraft charges.
As previously advised, after hearings in February 2008 and December 2008, the High Court decided that the Banks’ current terms and conditions relating to unauthorised overdraft charges and their various sets of historical terms and conditions, with the exception of one specific term used by a particular bank:
- Are not unenforceable penalties; but
- Are assessable for fairness under the Unfair Terms in Consumer Contracts Regulations 1999 (UTCCRs).
The Court of Appeal on 26 February 2009, confirmed the judgment of the High Court, stating that the unarranged overdraft charging terms are not part of the core bargain between a consumer and the bank. In April 2009 the banks were granted leave to appeal to the House of Lords.
The House of Lords heard the appeal from 23 – 26 June 2009 and their decision is expected later in the year. It is important to remember that the House of Lords is only deciding whether the banks’ terms and conditions are subject to the test of fairness.
What this means for any complaints.
In the meantime, the Financial Services Authority (FSA) has confirmed a further six-month extension to its waiver on handling complaints related to unarranged overdraft charges. Customer complaints relating to unarranged overdraft charges will therefore continue to remain on hold up until 26 January 2010 or on resolution of the test case whichever is sooner. The FSA agreed to this subject to conditions that protect your rights.
We will, however, continue to review all cases where genuine financial hardship is claimed during the waiver period. Where a customer has claimed financial hardship and is not happy with our response they are still entitled to be referred to, and dealt with by the Financial Ombudsman Service (FOS). See the Lending Code for further guidance.
The Banks will also continue to ask County and Small Claim Courts to keep cases relating to unarranged overdraft charges on hold until the test case process is concluded.
Further help
Individuals have the right to refer a complaint to the FOS or the Courts. However, apart from financial hardship cases, the FOS has agreed not to act on any complaints until the legal proceedings between the Banks and the OFT have been concluded. Should you issue a claim in the Courts, we will apply for a Court Order to put your claim on hold pending the outcome of the proceedings in the High Court.
Further information
A copy of the text of the full judgment can be found at www.judiciary.gov.uk
We will continue to keep customers informed of any further developments.