How to reclaim unfair bank chargesFrequently asked questions

What is the test case and what does it mean for me?

The Office of Fair Trading (OFT) has agreed with most of the major high street banks to take a ‘test case’ to the High Court to determine the fairness of the default charges banks impose on their customers.

The Financial Services Authority (FSA) has agreed that banks can temporarily stop processing complaints related to these charges (except in cases of financial hardship) while the test case is considered.

Which? believes the charges are unfair, and we are pleased that the OFT has decided to take action to resolve this issue.

Can I still challenge bank charges?

You can still make a complaint to your bank using the information and template letters in our step by step page. However, your claim will be frozen until the outcome of the test case.

Our advice is that it is best to lodge a claim with your bank now, rather than await the outcome of the test case.

Which banks are involved in the case?

The banks (and one building society) directly involved in this case are Abbey, Barclays, Clydesdale, HBOS, HSBC, Lloyds TSB, Nationwide and Royal Bank of Scotland. This represents about 90% of the retail banking market.

However, all providers of current accounts will have to abide by the outcome of the test case.

How long will the test case take?

The hearing of the first part of the test case began in January 2008. This was to establish whether the Unfair Terms in Consumer Contrast Regulations 1999 apply to unauthorised overdraft charges.

In April 2008 the judge ruled that the Regulations do apply. This was a victory for the OFT and the campaign against unfair charges – it means that the OFT will now look at the charges and determine whether they are unfair.

Disappointingly, the banks decided to appeal the judge’s ruling, so there will be a further case at the Court of Appeal towards the end of 2008.

However, the process could continue for longer, depending on how the courts, banks and OFT deal with the issues, and whether either side appeals later decisions. We’ll keep you up dated with any developments as they happen.

Why are complaints on hold?

The suspension of the complaints system is due to a special measure called a waiver that is periodically reviewed by the FSA. The waiver is designed to ensure that the banks keep consumers informed of the progress of the test case. The banks must maintain and preserve records of customers who incur overdraft charges so that these records are readily available to the FOS.

The waiver also requires the banks to liaise closely with the FSA so that they can process claims effectively and swiftly once the test case is decided. The banks have entered into an agreement with the OFT that they will not cause unnecessary delays in progressing the test case.

Is the situation the same in Scotland?

No. Although the regulations on unfair terms in consumer contracts apply in Scotland, the legal system is different from other parts of the UK. The courts will consider any limitation period regardless of whether it is raised by either side in a bank charges case.

If you live in Scotland you should take independent legal advice on your rights, as the timing of a claim could be significant. It may be important to lodge a court claim in order to protect your position although you will still be able to go the FOS.