banking

Update 21 July 2008

In July 2007 the FSA granted HSBC and the other Banks a waiver from dealing with customer complaints regarding overdraft charges. This waiver was granted subject to review in 12 months, or when the court case ended, whichever was sooner. As the court case process is still continuing, the FSA has now offered the Banks a new waiver which will last until 26 January 2009, or the earlier resolution of the case. This waiver contains the same conditions which protect the interests of consumers and will ensure no customers are disadvantaged. As outlined below if you have financial problems please contact us and we will try to help you solve them.

Following the hearing on 7-9 July 2008 the Court is considering whether, under terms and conditions previously used by the Banks, unarranged overdraft fees are capable of being assessed for fairness and whether they are capable of being penalties. Judgment on those issues will be given in due course.

22 and 23 May 2008 Procedural Hearing

What is happening?
As part of the ongoing test case process, a procedural hearing (known as a Case Management Conference) took place on 22 and 23 May, at which the next steps in the test case process were decided.

Firstly, the Court dealt with the issue of appeals.

• In April, the Court adjudged that unarranged overdraft fees are not exempt from being assessable for fairness under the Unfair Terms in Consumer Contracts Regulations 1999 ("UTCCRs"). The Court gave permission to the Banks to appeal this judgment.
  
  Note: 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, under the Banks' current terms and conditions, unarranged overdraft fees are not penalties, as the Banks have always maintained. The OFT did not seek permission to appeal on this issue.

Secondly, it was confirmed that, at a short hearing on 7/8 July, the Court will be asked to consider whether, under terms and conditions previously used by the Banks, unarranged overdraft fees are capable of being penalties.

Thirdly, whilst the Court concluded in April that unarranged overdraft fees are not exempt from being 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 was confirmed that the next steps in the test case will be decided on, or soon after, 8 July as the Banks, the OFT and the Court continue to work closely to bring a conclusion to the test case process as soon as possible.

24 April Judgment

The judge decided that:

• Our current terms are sufficiently clear to enable the typical consumer to have a proper understanding of them for sensible and practical purposes
• Unplanned overdrafts are one of the essential services which we provide to our current account customers.

A full copy of the judgment is available at www.judiciary.gov.uk

What is our stance on the test case process?
We are pleased that the judge agreed that our current charges are not unenforceable penalties and our terms are in plain intelligible language. We believe that the same analysis will apply to charges under our historic terms.

We remain committed to resolving, through the Court, the legal issues concerning overdraft charges. The 24 April judgment, and need for further Court cases, illustrates how complex those issues are. We expect that the case will continue to progress as quickly as possible and will work with the Office of Fair Trading (OFT) to achieve that.

What will happen to customer complaints about overdraft charges?
As previously agreed with the Financial Ombudsman Service and the Financial Services Authority (FSA), customer complaints relating to overdraft charges will remain on hold until the test case process is concluded.

If you do complain about your overdraft charges, we will acknowledge your complaint and record it on your file. When a final decision is reached in the test case, we will contact you as soon as possible to tell you how we will resolve your complaint. We will apply the decision in the test case to all complaints we receive.

Why are we allowed to stop dealing with overdraft charges complaints during the test case?
We and the other banks applied to the FSA for a suspension of the normal timetable for dealing with overdraft charges complaints. The FSA decided that it was appropriate to grant a suspension while the banks sought legal certainty on this issue. The conditions of the suspension are designed to ensure that customers are not disadvantaged in any way. You can read the form of the FSA suspension (direction) here: www.fsa.gov.uk 

Can I make a Court claim for a refund during the test case?
Yes, but we will apply to the Court to put your case on hold while the test case is running. This is because the issues being raised in customer complaints on overdraft charges are being considered in the test case process.

Can I complain to the Financial Ombudsman Service about my overdraft charges?
Yes, you can make a complaint to FOS but they have indicated that complaints will not be reviewed while the test case is running. If you do complain to FOS, you will receive a letter explaining this.

I am in financial difficulty what can I do?
If you have financial problems please contact us and we will try to help you solve them. There are a number of options available which we will discuss with you or your chosen financial advisor.

What is the background to this test case?
On 27 July 2007, the OFT, HSBC and six other UK banks and a building society started a test case to decide on the legality of unauthorised personal overdraft charges. Together, these banks provide more than 93% of current accounts in the UK.

The first part of the test case process was heard by the Court between 17 January and 8 February 2008. It dealt with certain preliminary issues of legal principle which included whether the UTCCR's apply to overdraft charges and whether overdraft charges can be penalties.

Where can I find out more?
You can find more information through the following links:

The British Bankers' Association 

The Financial Service Authority 

The Office of Fair Trading 

The Financial Ombudsman Service