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Journal of International Banking & Financial Law/2009 Volume 24/Issue 11, December/Articles/Bank
Charges - (2009) 11 JIBFL 670
Journal of International Banking and Financial Law
(2009) 11 JIBFL 670
1 December 2009
Bank Charges
Feature
The Office of Fair Trading v Abbey National Plc & others [2009] UK SC 6 (The Supreme Court) (Lord
Phillips, President; Lord Walker; Lady Hale; Lord Mance; Lord Neuberger) (25 November 2009)
Jonathan Lawrence
K&L Gates LLP
jonathan.lawrence@klgates.com
www.klgates.com
© Reed Elsevier (UK) Ltd 2009
FACTS
The question before the Supreme Court was whether as a matter of law the fairness of bank charges levied
on personal current account customers in respect of unauthorised overdrafts (including unpaid item charges
and other charges) could be challenged by the Office of Fair Trading ('OFT') as excessive in relation to the
services supplied to bank customers. That issue depended on the correct interpretation and application of
reg 6(2) of the Unfair Terms in Consumer Contracts Regulations 1999 (the '1999 Regulations') which read:
'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 renumeration, as against the goods or services supplied in exchange.'
The context required 'adequacy' to be read in the sense of 'appropriateness'.
CONCLUSION
The two paragraphs of reg 6(2) must be given their natural meaning: (a) what it is that the trader is to sell or
supply and (b) what it is that the consumer is to pay for what he gets. (a) is not to be reviewed for fairness,
nor is (b) for its adequacy or appropriateness.
Charges for unauthorised overdrafts are monetary consideration for the packages of banking services supplied to customers. They amount to over 30 per cent of banks' revenue stream from all personal current account customers. The fairness of the charges is exempt from review in point of appropriateness. The charges
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are part of the core or essential bargain between banks and customers. Banks rely on charges as an important part of the revenue generated from current account services and are therefore part of the price for the
service package banks agree to supply in exchange.
Any monetary price or remuneration payable under the contract between bank and customer would naturally
fall within the language of reg 6(2)(b). The charges were not concealed default charges designed to discourage customers from becoming overdrawn on their accounts without prior arrangement. The fact that liability
to pay the charges depended on specific events occurring was irrelevant to the conclusion that the charges
were part of the price paid by customers for holding a current account.