Current Account Preliminary Test Case
Barclays is currently participating in a test case on unauthorised overdraft charges along with six other banks and a building society (the Banks) and the Office of Fair Trading (OFT).
The Banks appealed against the court's initial ruling (dated 24 April 2008) that their unauthorised overdraft charges can be examined by the OFT to determine whether they are capable of being assessed for fairness under the Unfair Terms and Consumer Contract Regulations (UTCCRs). However, on 26 February 2009 the Court of Appeal rejected that appeal and upheld the previous decision.
In the latest stage of the test case, the Banks sought and were granted permission to appeal to the House of Lords (the country's highest court) as the Banks continue to believe that their charges should not be assessed for fairness under the UTCCR.
The House of Lords hearing took place in late June 2009 and we are waiting for the judgement. Although the Court of Appeal upheld the earlier judgment, it is important to note that this ruling is not concerned with whether the charges are fair - just whether the OFT is entitled to assess them for fairness.
The Banks will continue to work with the OFT to achieve a swift resolution for customers. In the meantime a further Financial Services Authority (FSA) waiver for dealing with customer complaints on unauthorised overdraft charges was introduced on 27 July 2009 for a further six months.
Please refer to the British Bankers Association website for further information.
FSA complaints handling waiver
At the start of the test case the FSA put customer complaints relating to unauthorised overdraft charges on hold. This means if a customer lodges a refund claim with Barclays during the test case, we will acknowledge the claim but hold them until the outcome of the test case.
A further Financial Services Authority (FSA) waiver for dealing with customer complaints on unauthorised overdraft charges was introduced on 27 July 2009 for a further six months.
On 18 August 2008 we introduced our Personal Reserve service. The charges under our Personal Reserve service are not unauthorised overdraft charges and therefore the FSA waiver does not apply to complaints about Personal Reserve. This means we will deal with complaints about our Personal Reserve service in line with our complaints handling procedures. However, the one exception is that, following consultation with the FSA, we have decided that if your complaint relates to the level, fairness or legality of the charges under the Personal Reserve service we will review the impact of the House of Lords judgment on such charges before responding to these complaints.
Background to the Test Case
On 27 July 2007, the OFT and the Banks started a court case to decide on the legality of unauthorised overdraft charges.
The case has been called a "test case" because the decision will clarify the law in this area. It is likely to apply to all current and new claims against current account providers in respect of unauthorised overdraft charges.
We believe that unauthorised overdraft fees are fair and that they reflect the service customers receive. It is important for everyone that we have legal certainty over unauthorised overdraft charges.
The first step in this process was a trial of 'preliminary' issues hearing in relation to the terms and conditions used by the Banks at that time. This trial concluded on 8 February 2008. In April and October 2008 the Court decided that the Barclays unauthorised overdraft charge terms and conditions then in force and the Barclays and Woolwich historic unauthorised overdraft charge terms and conditions are not capable of being penalties.
The Court also decided that the Barclays unauthorised overdraft charge terms and conditions then in force and the Barclays and Woolwich historic unauthorised overdraft charge terms and conditions are capable of being assessed for fairness under the UTCCRs. The Banks are appealing on this issue as they do not believe that the UTCCRs apply to these types of fees.
Other information
What is Barclay's stance on the test case process?
We agree with the judges ruling to date that:
- Barclays historic Terms and Conditions relating to unauthorised overdraft charges are not capable of being penalties; and
- those Terms and Conditions were in plain intelligible language.
We remain committed to resolving, through the Court, the legal issues concerning unauthorised overdraft charges. We will continue to progress this test case as quickly as possible and will work with the OFT to achieve this.
What happens to customer complaints surrounding unauthorised overdraft charges?
As previously agreed with the FSA, customer complaints relating to unauthorised overdraft charges will continue to remain on hold. The Banks have asked County and Sheriff Courts to keep cases relating to unauthorised overdraft charges on hold until the test case process is concluded.
If a customer has a complaint about their unauthorised overdraft charges, we will acknowledge their complaint and record it on their file. When a final decision is reached in the test case, we will contact these customers as soon as possible to tell them how we will resolve their complaint. We will apply the decision in the test case to all complaints we receive.
Why is Barclays allowed to stop dealing with unauthorised overdraft charges complaints during the Test Case?
Barclays and the other banks applied to the FSA for a waiver of the normal timetable for dealing with unauthorised overdraft charges complaints. In July 2007 the FSA decided it was appropriate to grant a suspension while the banks sought legal certainty on this issue. The conditions of the FSA waiver are designed to ensure that customers are not disadvantaged in any way. Customers can read the form of the FSA waiver (direction) at: www.fsa.gov.uk
The FSA waiver contains conditions which protect the interests of consumers and will ensure that no customers are disadvantaged. In particular, we ask that a customer contact us if they believe they are suffering financial hardship, as we will try to help them resolve the issue. As part of this process, we may take into consideration charges applied or due.
Can a customer make a court claim for a refund of unauthorised overdraft charges during the test case?
Yes, a customer can make a court claim for a refund during the test case. However, because the issues raised in customer court claims on unauthorised overdraft charges are being considered in the test case process, we are asking the court to put them on hold while the test case is running.
Can a customer complain to the Financial Ombudsman Service about their unauthorised overdraft charges?
Yes, a customer can make a complaint to the FOS, but the FOS has indicated that complaints will not be reviewed while the test case is running. If a customer does file a complaint with the FOS, they will receive a letter explaining this.
What about complaints about Personal Reserve?
If you have a complaint about our Personal Reserve service this can still be made and will be responded to in line with our complaint handling procedures. However, the one exception is that, if your complaint relates to the level, fairness or legality of the charges under the Personal Reserve service, we will register and store your complaint and ensure that it is not adversely affected by any delay in dealing with it. If we conclude that the House of Lords judgment does impact these complaints then we will write to customers who have made such a complaint to explain what will happen next, and if there is no impact we will progress your complaint.
Can a customer complain to the Financial Ombudsman Service about Personal Reserve?
Yes, a customer can complain to the FOS. If your complaint relates to the level, fairness or legality of charges under the Personal Reserve service incurred on or after 18 August 2008, the Ombudsman has indicated that they are likely to also put these on hold (at least until the House of Lords judgment has been given).
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