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OFT reply to Halifax new overdraft charging structure

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I sent a letter to the office of fair trading and this is what they replied with. Sorry if a similar reply has been posted somewhere already but I can't seem to find any.

 

Thank you once again for your email of 27 October 2009, further to our email of 17 November 2009, regarding the above named Company to the Office of Fair Trading (OFT). We apologise for the delay in responding to you.

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As we understand from your correspondence, you are unhappy with Halifax's decision to amend its terms and conditions in relation to its arranged overdraft charging structure from 6 December 2009. You may be concerned that the changes have been unilaterally imposed and that, if the daily charges were translated into an interest rate, then the rate would be very high, particularly for small overdrafts. This may be contrary to the Consumer Protection from Unfair Trading Regulations Act 2008, the Unfair Terms in Consumer Contracts Regulations 1999 and to the terms of the waiver agreed between Halifax and the Financial Services Authority (FSA) while the test case between the OFT and Banks is continuing.

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Thank you for bringing this matter to our attention.

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Office of Fair Trading’s (OFT's) work on Personal Current Accounts

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The OFT's market study "Personal Current Accounts in the UK", published in 2008, identified a number of concerns with the personal current account (PCA) market. These include the way in which unarranged overdraft charges function but do not relate to arranged overdrafts.

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To address concerns about unarranged overdraft charges, the OFT is conducting an investigation into the fairness of Banks’ unarranged overdraft charging terms under the Unfair Terms in Consumer Contracts Regulations 1999 (UTCCRs) and has brought a test case with seven banks and one building society.

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The UTCCRs protect consumers against unfair standard terms in contracts they make with traders. The Banks have argued that the unarranged overdraft charging terms cannot be assessed for fairness due to an exemption in the UTCCRs. On 25 November, the Supreme Court handed down its judgment overturning previous High Court and Court of Appeal rulings that unarranged overdraft charging terms can be assessed in full for fairness by the OFT.

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The OFT will now consider the detail of this judgment before it makes a decision on whether or not to continue its investigation into unarranged overdraft charging terms. It will also explore with others the implications for consumers and for existing and future legislation and regulation. The OFT expects to make a further announcement in December.

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In relation to the test case, you are concerned that the changes Halifax has made to its terms and conditions breach the terms under which the Financial Services Authority (FSA) has allowed banks, in respect to complaints involving the application of the UTCCRs to unarranged overdraft charges, to waive their normal obligations to respond. The FSA granted this 'waiver' to assist the orderly or resolution of complaints while the test case is ongoing. However, the FSA waiver relates to changes to the level or structure of unarranged overdraft charges, not charges that relate to arranged overdrafts. Further, in light of the Supreme Court judgment, the waiver has now ended.

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You may be interested to know that despite the fact that you may have an overdraft with the Halifax does not necessarily prevent you from switching to another PCA provider. A new provider may be prepared to offer you a current account with an overdraft facility that you could then use to repay your existing overdraft with Halifax. It may be worth discussing this with PCA providers that you could consider switching to. The OFT has worked with the industry to improve the switching process.

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Further information about the OFT's work on personal current accounts can be found on the OFT website at:

http://www.oft.gov.uk/advice_and_resources/resource_base/marketstudies/completed/personal/personal-test-case/

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Further information about the waiver can be found on the FSA website at: Unauthorised overdraft charges : FSA Money made clear ? News

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Consumer Credit Act

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The OFT’s powers under the Consumer Credit Act 1974 (as amended by the Consumer Credit Act 2006) may be of relevance to the concerns you raise. The OFT has a duty to license and regulate businesses involved in consumer credit activities provided that they satisfy the OFT they are fit to hold a licence.

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The OFT has recently issued draft guidance on the irresponsible lending element of the fitness test set out in section 25 of the Consumer Credit Act 1974. This sets out the standards for all form of lending, including overdrafts, and covers the need for lenders to only vary interest rates when there is objective justification to do so. Further information about this can be found at: The Office of Fair Trading: Irresponsible lending

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The OFT, as the regulator of the Consumer Credit Act, can investigate any behaviour of a licence holder which may appear to us to be deceitful or oppressive, or otherwise unfair or improper.

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We are considering whether the Halifax terms raise concerns, but have not reached any views at this stage. The OFT cannot normally disclose details of action that is being contemplated or underway, however, we can and do publicise formal action on our website (The Office of Fair Trading: making markets work well for consumers).

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We hope this information has been helpful. If you are unhappy with how the Halifax deals with your complaint, the Financial Ombudsman Service (FOS) may be able to help. They can be contacted on 0300 123 9123 or at:

complaint.info@financial-ombudsman.org.uk

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We hope that this information proves to be useful to you and would like to thank you once again for writing to us and bringing this matter to our attention. The information you have helpfully provided will add to our intelligence about this Company and it may prove to be useful to us in the future.

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Yours sincerely

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Samit Patel

Enquiries and Reporting Centre (ERC)

Office of Fair Trading (OFT)

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Interesting, what's missing is a comment on Halifax ignoring customers clear instructions that they do not accept the new terms.


The views I express here are mere speculation based on my experience. I am not qualified nor insured to give legal advice and any action you take will be at your own risk.

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