The OFT and certain Banks have agreed to bring a
test case in the Commercial Court to resolve legal uncertainties
surrounding the enforceability of unauthorised overdraft
charges.
Such charges have been the subject matter of an
ongoing OFT formal enquiry, a growing number of cases issued by
account holders in court and a significant number of complaints by
account holders provided to the Financial Ombudsman
Service.
The test case will seek to resolve whether
contractual provisions entitling banks to levy these charges are
unenforceable at common law or under the Unfair Terms in Consumer
Contracts Regulations 1999. The Banks will seek to stay all current
and future court proceedings against them regarding these charges
until resolution of the test case. In conjunction with the test
case, the FSA has agreed to waive rules in its Dispute Resolution
Sourcebook (DISP) which requires firms handle complaints within
prescribed timescales, for an initial period of a year or until
resolution of the test case, if earlier. The Financial
Ombudsman Service has also agreed not to proceed with complaints
received on these charges until resolution of the case.
The outcome of the test case will clearly have a significant effect
on how both the court and the Financial Ombudsman Service view such
charges for current account holders going forward.