FAIR TRADING — Contract — Unfair terms — Banks charging customers with personal accounts when making payments without holding necessary funds in account — Whether exempt from assessment as to fairness — Unfair Terms in Consumer Contracts Regulations 1999 (SI 1999/2083), reg 6(2)

Office of Fair Trading v Abbey National plc and Others [2008] EWHC 875 (Comm); [2008] WLR (D) 128

QBD: Andrew Smith J: 24 April 2008

Terms in standard form contracts between bank and customer providing for relevant charges were not exempt from assessment as to fairness under reg 6 of the Unfair Terms in Consumer Contracts Regulations 1999.

Andrew Smith J so held when considering the Office of Fair Trading’s application for a declaration that the defendants (1) Abbey National plc; (2) Barclays Bank plc; (3) Clydesdale Bank plc; (4) HBOS plc; (5) HSBC Bank plc; (6) Lloyds TSB Bank plc; (7) Nationwide Building Society; and (8) Royal Bank of Scotland Group plc’s relevant terms and charges in current agreements (and to the extent relied on by the defendants, in historical agreements) were not excluded from an assessment for fairness under the 1999 Regulations by reason of reg 6(2)(a) and/or (b).

Reg 6(2) provided: “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 remuneration, as against the goods or services supplied in exchange”.

ANDREW SMITH J said that the terms in standard form contracts provided for four basic categories of relevant charges about which the claimant was concerned: unpaid item charges, paid item charges, overdraft excess charges, and guaranteed paid item charges. The terms generally used by the banks for personal current accounts (other than basic accounts) were in plain, or largely in, plain intelligible language. Further, the charges were not penalties and so were not unenforceable at common law. However, the banks’ submission that the relevant charges were the price or remuneration, or part of the price or remuneration, for services that they supplied did not provide a basis for concluding that the relevant terms fell within reg 6(2).Therefore the relevant terms were not exempt from assessment.

Appearances: Brian Doctor QC, Jemima Stratford, Richard Coleman and Sarah Love (Office of Fair Trading) for the Office of Fair Trading; Ali Malek QC and Richard Brent (Ashurst LLP) for Abbey National plc; Iain Milligan QC, Andrew Mitchell and Simon Atrill (Simmons & Simmons) for Barclays Bank plc; Richard Salter QC, John Odgers and Adam Kramer (Addleshaw Goddard LLP) for Clydesdale Bank plc; Robin Dicker QC, Timothy Howe QC, Jeremy Goldring and James McClelland (Allen & Overy) for HBOS plc; Richard Snowden QC, Mark Hoskins, Daniel Toledano and Patrick Goodall (Freshfields Bruckhaus Deringer) for HSBC Bank plc; Bankim Thanki QC, Richard Handyside and James Duffy (Lovells LLP) for Lloyds TSB Bank plc; Geoffrey Vos QC and Sonia Tolaney (Slaughter and May) for Nationwide Building Society; Laurence Rabinowitz QC, Malcolm Waters QC, David Blayney and Benjamin Pilling (Linklaters LLP) for the Royal Bank of Scotland Group plc.

Reported by: Ben Urdang, barrister