OFT brings test case on overdraft charges

by Gill Montia

Story link: OFT brings test case on overdraft charges

The Office of Fair Trading (OFT) has forged an agreement with a number of UK banks, including HSBC, Lloyds TSB, Royal Bank of Scotland and Nationwide, to go to court in a test case over overdraft charges.

Thousands of customers have sued their banks for the return of what they consider to be unreasonable fees for unauthorised overdrafts.

Mostly, banks have settled such cases out of court but the sheer number of claims has caused serious problems for the courts.

According to the OFT, members of the banking sector are now keen to resolve the problem and have agreed to settle the level of charges by means of a test case.

Tomorrow the OFT will commence proceedings in the High Court for a declaration on the application of the law in respect of unauthorised overdraft charges.

The nub of the matter is that the banks do not accept that the level of charges applied for unauthorised overdrafts contravene the unfairness rules of the Unfair Terms in Consumer Contract Regulations.

The OFT believes that they do and if it is correct, the court case will establish this legal principle clearly.

No bank has yet outlined the case for such charges in open court and if the banks do not argue their case successfully in the High Court, many more of their customers could be eligible for refunds.