OFT launches test case on unauthorised overdraft charges

The OFT is to commence proceedings in the High Court for a declaration on the application of the law in respect of unauthorised overdraft charges.

Tens of thousands of complaints that these charges are unfair have been received by the County Courts and the Financial Ombudsman Service. The banks do not accept that the unfairness rules of the Unfair Terms in Consumer Contract Regulations apply. The OFT believes that they do and is seeking to establish this legal principle clearly in the court. The OFT considers that a quick determination of this point of principle will assist in securing a clear and orderly resolution of the fairness of these charges.

The test case complements the ongoing market study into personal current accounts, which addresses wider questions about competition and price transparency in the provision of personal current accounts.

The OFT will continue to work closely with the Financial Ombudsman Service and the Financial Services Authority, in addition to consulting with banks and consumer groups.