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Press Office

Test case - Unauthorised overdraft charges

Background

On 27 July 2007, the Office of Fair Trading (OFT) and a number of UK banks and a building society (the banks) started a court case to decide on the legality of unauthorised overdraft charges.

The case was brought in order to clarify the law in this area and the decision applies to all current and new claims against current account providers about unauthorised overdraft charges.

The OFT argued that charges in respect of unauthorised overdrafts are unfair under the Unfair Terms in Consumer Contracts Regulations 1999 (1999 Regulations). The banks argued that the terms permitting such charges are core terms under the 1999 Regulations and so are excluded from assessment of fairness because they were part of the price paid by the customer for the banking services provided. The High Court and the Court of Appeal rejected the banks' arguments and the banks appealed to the Supreme Court.

Banks and building societies, including ourselves, have not been dealing with or resolving customer complaints on overdraft charges whilst the test case has been ongoing.

Whilst we were waiting for the outcome of the test case, we applied to the Financial Services Authority (FSA) for a suspension of the normal timetable for dealing with overdraft charge complaints. The FSA decided that, in the circumstances, it was appropriate to grant us a suspension of our obligations under the FSA's complaint handling rules whilst legal certainty was sought on this issue and this suspension has been in place since 26 July 2007.

Outcome of the test case

The test case has now been concluded following the Supreme Court judgment which was delivered on 25 November 2009.

The Supreme Court has unanimously allowed the appeal by the banks. This means that the charges for unauthorised overdraft charges are not assessable by the OFT for fairness under the 1999 Regulations, as these are part of the price paid by the customer for the banking services provided.

What does the outcome mean for my complaint?

The FSA lifted the waiver granting us a suspension of our obligations under the FSA's complaint handling rules on 25 November 2009. This means we will now consider your complaint in light of the decisions of the Supreme Court. We will write to those customers affected.

What does the outcome mean for my court claim?

All claims were put on hold pending the outcome of the test case. Now that the decision has been announced, you will be free to pursue your claim in the courts. However, we would suggest that you may wish to reconsider the merits of your claim in light of the decision of the Supreme Court. You may also wish to take further legal advice in this regard.

Where can I find out more?

You can contact us by calling us on 0845 234 4050.

Alternatively, you can find more information through the following links:

Leeds Building Society is authorised and regulated by the Financial Services Authority and our registration number is 164992. The Society's Head Office address is 105 Albion Street, Leeds LS1 5AS. The Society's permitted business is arranging and advising on Mortgages and General Insurance. You can check this by visiting the FSA website at www.moneymadeclear.fsa.gov.uk or by contacting the FSA on 0845 606 1234.

Leeds Building Society is authorised and regulated by the Financial Services Authority and our registration number is 164992. The Society's Head Office address is 105 Albion Street, Leeds LS1 5AS. The Society's permitted business is arranging and advising on Mortgages and General Insurance. You can check this by visiting the FSA website at www.moneymadeclear.fsa.gov.uk or by contacting the FSA on 0845 606 1234.
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