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 22 May 2008, the judge set out the next steps in the test case. One of the points discussed was whether any of the parties involved in the case had the right to appeal the preliminary judgement. The judge confirmed that the parties, including Nationwide, do have the right to appeal. Nationwide and the banks will appeal the part of the judgment that says their charges are subject to the test of fairness, as they consider these types of fees are fair and the regulations do not apply to them. It is in the public interest to have full clarity and only the court can make the final decision on whether the charges are fair.

A short hearing took place on 7, 8 and 9 July 2008 for the judge to consider 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.

We will 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.