In conjunction with the Financial Services Authority ("FSA") and the Office of Fair Trading a number of current account providers submitted a ‘test’ case last year, approaching the High Court for a ruling on the complex issue of unauthorised overdraft fees.
On 24 April 2008, the Court issued its judgement on the first stage of the test case, which dealt with preliminary issues of legal principle.
The judge has decided that the Office of Fair Trading ("OFT") can apply consumer contract regulations to decide if bank overdraft charges are fair or not.
The judge has however stressed that his decision today did not mean that the terms imposed on customers by the banks were unfair, or that they were not binding on consumers. The banks individual terms will be reviewed in further hearings.
The full judgement is complex, and like the banks directly involved in the test case, we will be studying the ruling in more detail.
Consequently, customer complaints relating to unauthorised overdraft charges will currently remain on hold.
Seven banks and one building society (the "Banks") are engaged in a High Court
test case with the Office of Fair Trading to decide the legality of unauthorised
overdraft charges. Alliance & Leicester plc is not one of the Banks involved
in the test case.
The first stage of the test case was heard by the Court between 16 January and 8 February 2008 and dealt with certain preliminary issues of legal principle. Further Court hearings will be required before the test case process is concluded. The likely timetable for the next steps in test case will be decided by the Court at a hearing which we understand will take place in early May 2008.
Customer complaints relating to unauthorised overdraft charges will currently
remain on hold, as previously agreed with the Financial Ombudsman Service and
the Financial Services Authority. The Banks will continue to ask the County
Courts in England, Wales and Northern Ireland and the Sheriff Court in Scotland
to keep cases relating to unauthorised overdraft charges on hold until the test
case process is concluded.
Please refer to the British Bankers' Association (BBA) or the Financial Services
Authority websites for further information. We will update our website once
more guidance is available.
What if I have a complaint outstanding?
The complaint will remain with Alliance & Leicester and will not be dealt with until the test case is resolved. Complaints will be dealt with as quickly as possible once the test case is concluded.
What if I wish to complain from today?
Customers can still complain now or they can wait until the full test case process is complete - they will not be disadvantaged. The complaint will be recorded by us and will be dealt with as quickly as possible once the test case is concluded. The FSA still require any new complaints to be promptly acknowledged.
What if Scotland is the most likely jurisdiction?
Customers may choose to take their complaint to the FOS or the courts in Scotland. The right to refer the complaint to the FOS will not be affected. However, if customers want to bring a claim to the courts in Scotland, the timing of when the claim is raised may be important. They are advised to seek independent advice on filing a claim now to protect their rights (although a court fee will be payable).
What if I have already had a settlement and think they may want it reviewed?
A full and final settlement stands. In some exceptional circumstances the complaint can be reviewed. Customers can still complain about new charges incurred.
What if have received a final response from us which does not include an offer?
Customers still have the option of complaining to FOS. However, it is unlikely that the FOS will consider any complaints about charges for unauthorised overdrafts until complete resolution of the test case. Other than where the customer claims financial hardship – see below.
What if I am in very difficult financial circumstances? – (hardship cases)
Alliance & Leicester will continue to review all cases where hardship is claimed during the waiver period. Where a customer has claimed hardship and is not happy with our response they are still entitled to be referred to, and dealt with by, the FOS. See the Banking Code for further guidance.
What if I wish to complain to Alliance & Leicester about other issues?
Customers can continue to use the existing complaints process to seek redress about other financial matters, such as insurance, mortgages and current accounts. However, if their complaint relates to the level, fairness or unlawfulness of unauthorised overdraft charges, that element of the complaint will be registered but not dealt with until a resolution has been achieved.
Can I complain to the Financial Ombudsman Service about my bank charges?
The Financial Ombudsman Service (FOS) has decided not to review complaints while the test case is running. If you do complain to FOS, you will receive a letter explaining that.
I have already accepted an offer from you. Will my claim be revisited?
If you have accepted a 'full and final settlement', we believe it unlikely you would be awarded a further sum even if the test case indicates a potentially larger amount. However, this does not preclude you from asking for repayment of any new charges incurred if the courts find they are unlawful.
How long will the test case take?
The timetable for the next steps in the test case will be decided by the Court at a hearing expected by the end of May. The Banks are keen that all outstanding issues should be resolved as expeditiously as possible. They will be making case management proposals at this hearing which are consistent with this aim. The Banks and the OFT will each have to decide by the time of that hearing whether they wish to appeal any aspects of the judgment.
What if I have a case on hold at the county court?
The judge indicated that these cases should continue to be put on hold at least until the next step of the test case process and probably beyond that.
We will post updates on the test case on our website and in accordance with the FSA's complaint handling rules, we will write out to customers to keep them advised of progress on their complaint.
Alternatively, you can find more information on the 'test case' through the following links:
The Financial Services Authority:
www.fsa.gov.uk
The Office of Fair Trading:
www.oft.gov.uk
The Office of Fair Trading latest update:
www.oft.gov.uk/update
The Financial Ombudsman Service:
www.financial-ombudsman.org.uk
British Bankers Association:
www.bba.org.uk
The Banking Code:
www.bankingcode.org.uk