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. It is agreed that the only way of bringing clarity and certainty to this issue is for the courts to make a judgement.

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 24 April 2008, the court issued its judgement on this first stage of the test case process. The preliminary 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.

On 8 October 2008, the court issued its judgement on whether the banks' historic overdraft charges are capable of being penalties. Nationwide was not part of this exercise, because the OFT agreed that our historic terms and conditions relating to charges are so similar to our current terms and conditions that, on the basis of the judge’s earlier ruling, they do not amount to penalties.

The judge who decided the first stage of the test case gave the parties, including Nationwide, permission to appeal the part of the judgment that says their charges are subject to the test of fairness. A hearing took place in the Court of Appeal between 28 October and 5 November 2008. On 26 February 2009, the Court of Appeal issued its judgment. The court has not said the fees are unfair, but that a court can now determine their fairness. The judgment is complex and we and the banks are currently considering the implications. On 2 April 2009, Nationwide and the banks involved in the test case were granted leave to appeal to the House of Lords.

On 3 April 2009, the OFT announced that it is to streamline its investigation into unarranged overdraft charges by focusing on the terms of three banks in particular. The aim is to progress the case in the shortest and most efficient way possible. The banks the OFT has chosen to look at are Lloyds TSB, HSBC and Clydesdale. This does not mean that the OFT expects to find the terms of these banks more or less unfair than those of other parties involved in the case. The OFT believes that the terms of the three selected banks provide the best representative selection of the unarranged overdraft charging terms offered by all the parties involved in the case.

We welcome this move and will continue to work closely with the courts and with the OFT to bring this to a conclusion as quickly as possible. Any complaints relating to the fairness and legality of charges are currently on hold by authority of a waiver that has been granted by the Financial Services Authority. 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. If you have already made a complaint to Nationwide, you do not need to do anything further at this time.

This internet site will be updated with further details when they are available.