• FSA Library
  • Other publications
    • Miscellaneous documents
      • 2006

6 September 2006

We received a complaint that a term in a building society savings account contract which restricted customers' access to their account may have been unfair under the Unfair Terms In Consumer Contracts Regulations 1999 (the Regulations).

This was because the term may have been drafted in a wider way than necessary to protect the legitimate interests of the building society. In addition, it did not set out the circumstances in which the building society might exercise its right and it did not explain the nature of the constraints that may be put in place.

The term was based on the model savings account terms and conditions (issued in 1998) of the trade body for building societies, the Building Societies Association (the BSA). The BSA fully cooperated with us and agreed to amend the relevant term. Its new model term 8(3) meets our concerns as it clearly sets out an exhaustive list of the circumstances in which the term may be used with examples, and it states how the term will operate in practice – including the constraints that may be applied.

The BSA has written to its building society members to notify them of the new model term. It cannot require members to amend their terms and only a court can ultimately determine whether a term is fair under the UTCCRs. However, we expect members with the same or similar terms to amend them to remove the potential for unfairness and improve the clarity of the term, and also to apply the amended term in practice to existing customers. The BSA fully endorses the FSA's position.

The previous model term 8(3) read:

We can limit at any time without notice the amount which may be withdrawn in respect of any account, if we reasonably consider it necessary in order to protect the interests of the membership as a whole.

The new model term 8(3) reads:

(3) We can restrict at any time the amount which can be withdrawn from any account. We will only do this if:

1. we reasonably believe that there may be fraudulent activity or other financial crime affecting the account;
2. we are required to do so by any law, regulation or court order;
3. there is a dispute (which we reasonably believe may be genuine) about the ownership of, or entitlement to, the money in the account;
4. circumstances beyond our reasonable control prevent us from offering a normal service (such as in the event of terrorist threat, computer systems failure or strikes); or
5. circumstances exist which lead us reasonably to believe our financial stability is under threat (such as where rumours cause actual or potential abnormal levels of cash withdrawals).

In the case of (d) and (e) above:

1. we will act proportionately to the circumstances in question;
2. we will take all reasonable steps to ensure that the restrictions are lifted as soon aspractical and to minimise the inconvenience to you;
3. we will take into account the interests of the Society's membership as a whole;
4. we will, if practical, give advance notice; and
5. we may consider exceptions to the restrictions if we are reasonably satisfied that [extreme] [substantial] hardship would otherwise be caused.