OFT v Abbey and others April 2008 - what this means for you

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The judgment out today basically had three points to decide:


1. If the Unfair Terms in Consumer Contracts Regulations of 1999 could be applied to the terms relating to bank charges for overdrafts in personal current accounts.

2. If such terms were written in plain and intelligible language

3. If the law of penalties applies to overdraft charges in personal current accounts.



The High court held:


1. In favour of the OFT - yes the UTCCR 1999 do apply

2. Mainly in favour of the banks although some in favour of OFT

3. The law of penalties does not apply to any of the terms considered in relation to overdraft charges because either the term did not give rise to a contractual obligation or prohibition so there was no breach of contract or in the case of Barclays, the charges considered were not payable on the breach of contract.



This is a massive victory on the part of the consumer. This means that the High Court have ruled that the Unfair Terms in Consumer Contracts Regulations do apply to overdraft charges which the banks have always denied.


This was simply the first round which may be subject to an appeal. Once the first round is finalised their may be further litigation to decide if the charges are unfair or there may be a compromise agreement between the OFT and the banks. But it is an important first step in getting a final decision.The court will be hearing submissions on historic terms at a later date. Each term is considered on its individual merits so it may be that some charges are payable on breach and therefore subject to the law on penalties.





What this means for you:




If your claim is currently stayed - the stay will remain in place until at least May 22nd when a decision will be made on any applications for appeal. Even if there are no appeals the stays may remain in place after this time until the second issue is resolved.





If you have not yet put in a claim but have written your preliminary letter do continue to make a claim so that you can claim your interest. If you wait until the outcome of the final decision it is unlikely that you will be able to file a claim as assuming the court rules in the consumer's favour the banks are likely to pay out on receiving complaint without waiting for you to file a court claim. In which case you will lose out on the valuable interest.


If you have not done anything yet then you can start the process by doing a Subject Access Request as detailed in the step by step instructions and then totalling up your charges using the spreadsheets and send off your preliminary letter demanding money following the normal process.


Claims which are not affected by this decision:


CREDIT CARD
MORTGAGE CLAIMS
CLAIMS ON LOAN ACCOUNTS


Claims which are affected:

All personal bank accounts

The ruling on penalties will have serious implications on business claims.
It is not currently advisble to start a claim on a business account until further guidance is given on the issue of penalties in relation to historic terms.
If you have a business claim already lodged with the court you may like to consider putting your claim on hold until this matter is determined. You can do this by making an application for a stay using form N244. A court fee is payable but is less if you get consent from the defendant before applying as this negates the need for a hearing.