Nationwide and seven banks are engaged in a High Court test case with the Office of Fair Trading (OFT) to decide the legality of unauthorised overdraft charges. The first stage of the test case process was heard by the Court between 16 January and 8 February 2008, and dealt with certain preliminary issues of legal principle.

On Thursday 24 April 2008, the Court issued its judgement on this first stage of the test case process. The judgement is complex and we and the banks are currently considering its implications.

The ruling covered three aspects:

1. On the issue of whether the charges were penalties, the judge ruled that they were not.
2. The judge ruled that Nationwide’s terms and conditions are in plain and intelligible language.
3. The judge ruled that charges are subject to the test of fairness under the Unfair Terms in Consumer Contracts Regulations 1999.

Further Court hearings will be required before the test case process is concluded. The likely timetable for the next steps in the test case process will be decided by the Court at a procedural hearing which will take place on 22 May 2008.

As previously agreed with the Financial Ombudsman Service and the FSA, customer complaints relating to unauthorised overdraft charges will currently remain on hold. We and the banks will continue to ask County and Sheriff Courts to keep cases relating to unauthorised overdraft charges on hold until the test case process is concluded.