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Banks Lose Appeal Against OFT

26 February 2009

An appeal by eight banks, against a High Court ruling that a regulator can investigate the fairness of overdraft charges, has been thrown out.


The Appeal Court ruled that the Office of Fair Trading (OFT) has the power to investigate the issue of bank charges.

The OFT welcomed the Appeal Court ruling.

"The court found that these terms are not part of the core or essential bargain between a consumer and their bank, and therefore consumers do have protection under the Unfair Terms in Consumer Contract Regulations (UTCCRs) for these terms," the OFT said.

"We expect to reach a final decision on fairness later this year," it added.

Banks continue fight

Sir Anthony Clarke, Master of the Rolls, dismissed the banks' appeal and told them they should now allow the OFT to decide whether their charges were fair or not.

He said four High Court judges had now come to the same conclusion on the issue of the OFT's jurisdiction.

However, the British Bankers' Association (BBA) said its members still disputed the decision of the High Court and now the Appeal Court.

"The banks continue to believe that the Regulations do not apply to these type of charges," a spokesman said.

"The banks will apply to the House of Lords for permission to appeal the Court of Appeal's decision.

"The banks will work with the OFT to ensure the next stages in the test case process are progressed as quickly as possible," he added.

Unanimous decision

The banks had argued last year, in both the High Court and the Appeal Court, that their overdraft charges fell outside the scope of the 1999 Unfair Terms in Consumer Contracts regulations.

However, the three Appeal Court judges rejected this view.

"We have unanimously concluded that the application should be refused," said Sir Anthony.

"The issues should now be resolved by an OFT assessment of fairness," he added.

He refused the banks leave to appeal further, but they have decided to apply anyway directly to the House of Lords for permission to appeal.

Bank charges campaigners were delighted with the Appeal Court ruling.