Clydesdale Bank, with six other banks and one building society ("the Banks"), are engaged in a High Court test case with the Office of Fair Trading ("OFT") to decide the legality of unarranged overdraft fees. The first stage of the test case process was heard by the Court between 16 January and 8 February 2008 and dealt with certain preliminary issues of legal principle.
On 24 April 2008 the Court issued its judgment on this first stage of the test case process. As part of the ongoing test case process, a procedural hearing (known as a Case Management Conference) took place on Thursday 22 and Friday 23 May 2008. Various next steps in the test case process were decided at the hearing.
Firstly, the Court dealt with the issue of appeals. The Court gave permission to the Banks to appeal April's Court judgment that unarranged overdraft fees are assessable for fairness under the Unfair Terms in Consumer Contracts Regulations 1999 ("UTCCRs"). The Banks are appealing on this issue as they continue to believe that the fees are fair and that the UTCCRs do not apply to these types of fees. There is limited guidance from case law on whether and how the UTCCRs apply in these circumstances and as the test case process is of considerable public interest, it is important for the issues to be fully tested.
In April, the Court confirmed that the Banks' current terms and conditions relating to unarranged overdraft fees are not unenforceable penalties, as the Banks have always maintained. The OFT confirmed that they would not be seeking permission to appeal on this issue.
Secondly, it was confirmed that there will be another hearing where the Court will be asked to consider whether terms and conditions previously used by the Banks are capable of being penalties. A short hearing to decide this will take place on 7 to 9 July 2008.
While the Court concluded in April that unarranged overdraft fees are assessable for fairness, the Judge was explicit in stating that this does not mean that they are unfair. A further hearing will be required in order for the Court to determine the issue of fairness. It is not yet possible to confirm when this hearing will be but the Banks are working closely with the OFT and the Court to bring a conclusion to the test case process as soon as possible.
As previously agreed with the Financial Ombudsman Service and the Financial Services Authority, customer complaints relating to unarranged overdraft fees will currently remain on hold. The Banks will continue to ask County and Sheriff Courts to keep cases relating to unarranged overdraft fees on hold until the test case process is concluded.