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FSA/PN/119/2007
21 November 2007

The Financial Services Authority (FSA) has completed its review of the 'waiver' of its complaints handling rules in the context of unauthorised overdraft charges. The waiver removes the obligation to deal with unauthorised overdraft charges complaints in the time specified under FSA rules. The FSA has concluded that the waiver is operating effectively and can remain in place.

The waiver was granted on 27 July 2007 to support the test case on unauthorised overdraft charges brought in the High Court by the Office of Fair Trading (OFT). The purpose of the test case is to bring certainty on whether these charges are fair and lawful. The waiver requires complaints to be put on hold until certainty is established and complaints about these charges can be dealt with consistently and fairly. The FSA pledged to review the waiver after two months.

Following detailed examinations of firms' compliance with the conditions of the waiver and extensive consultations with consumer groups and other stakeholders, the FSA has established that the waiver is meeting its four key requirements:

• An effective stay of proceedings in the courts of England, Wales, Scotland and Northern Ireland is in place;
• The Financial Ombudsman Service (FOS) is likewise staying cases about unauthorised overdraft charges;
• Firms granted the waiver are complying with its conditions, including the need for clear communications with customers and appropriate handling of financial difficulty cases; and
• The continuation of the waiver remains appropriate to assist the test case.

Clive Briault, FSA Managing Director, Retail Markets, said:

"The test case between the OFT and the firms is a crucial step in establishing certainty about the legality and fairness of unauthorised overdraft charges. When this certainty has been established complaints about unauthorised overdraft charges can be dealt with consistently and fairly.

"The waiver we granted in July allowed firms to put complaints about unauthorised overdraft charges on hold until these complaints could be dealt with consistently and fairly. But it was important to review the operation of this waiver to ensure that it was working as intended. Our thorough review shows that it is appropriate for the waiver to remain in place.”

Particular concerns had been raised during the review period about the position under the waiver of complainants who may be in financial difficulty. The FSA is satisfied that the relevant part of the waiver is being complied with. However, in view of the importance of this issue, the FSA will carry out further work, in conjunction with the Banking Code Standards Board (BCSB), to check that firms continue to provide appropriate treatment of consumers in genuine financial difficulty.
The waiver review confirms that it remains appropriate for the waiver to continue to apply to consumers in Scotland and Northern Ireland.

The review has also clarified the status of small business accounts, which are not covered by the waiver. The FSA has agreed with the firms arrangements to ensure small business customers are not disadvantaged.

In the course of the review the FSA found that a number of firms had changed their terms and conditions in relation to unauthorised overdraft charges. In the waiver, each firm agreed 'it will not make materially adverse changes in the level of its unauthorised overdraft charges (or in ways that it applies such charges to its customers' accounts) which could amount to customer abuse'. The FSA will be closely monitoring how any change made by a firm will affect customers in practice and whether this amounts to a breach of the waiver.

The test case is expected to start in January 2008.

Notes for editors

1. The relevant part of the waiver requires complaints about other matters such as financial difficulty to be identified and dealt with in the normal way, with consumers being treated sympathetically and positively in accord with the Banking Code.
2. The waiver is available on the FSA website
3. The waiver review report is available on the FSA website.
4. The FSA regulates the financial services industry and has four objectives under the Financial Services and Markets Act 2000: maintaining market confidence; promoting public understanding of the financial system; securing the appropriate degree of protection for consumers; and fighting financial crime.
5. The FSA aims to promote efficient, orderly and fair markets, help retail consumers achieve a fair deal and improve its business capability and effectiveness.