Are bank charges fair?

This is the question the Office of Fair Trading (OFT) would like to ask, particularly in relation to unauthorised overdraft fees and associated charges imposed by leading banks on personal current accounts.   The OFT has jurisdiction to enforce the Unfair Terms in Consumer Contracts Regulations 1999 (UTCCRs).  In a test case brought in July 2007 against a number of banks and one building society, the OFT sought a court declaration that it had jurisdiction under the UTCCRs to review the relevant bank charges. In both the High Court and Court of Appeal it was ruled that the OFT had the necessary jurisdiction.

The dispute concerns whether the unauthorised overdraft facilities and services provided by a bank are proper services for which the fees and charges are payment, or whether the fees and charges are punitive in nature and potentially unfair.

A great deal of the legal arguments surround the interpretation of Regulation 6(2) of the UTCCRs, which reads:

(2) In so far as it is in plain intelligible language, the assessment of fairness of a term shall not relate-
(a) to the definition of the main subject matter of the contract, or
(b) to the adequacy of the price or remuneration, as against the goods or services supplied in exchange.

The legal arguments are complex, requiring the courts to review the European Union directive that gave rise to the UTCCRs, including the directive’s drafts and associated opinions circulating between the European Union institutions before it was made (the so called “travaux préparatoires”). It is therefore no surprise that the case has now reached the House of Lords, who began hearing the arguments today.

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