20 year claim limit in Scotland & other ramblings

[Advocate]

There are questions about abuse of process here. Generally you are require to bring all your claims arising from the same cause in the one action. However, I understand from these fora that people in Scotland are raising multiple actions to circumvent the low limits in the small claims/summary cause procedure (£750 and £1500 respectively). I am unsure if the point has been raised by the banks. However, I would If I were them, as once you go above £1500, you are into ordinary cause procedure which allows those with good lawyers greater procedural mechanisms to fight claims.

[Robertxc]

It follows that, as the law on penalty charges has been clear for years, the Scottish courts will not entertain the suggestion that a pursuer has only now become aware that they are penalty charges, as these same people have access to lawyers (this despite the cost!) to advise on these legal questions. This is what is meant by exercising reasonable diligence.

I don't think that anyone could possibly have been certain that the bank's charges amounted to penalties prior to the OFT's statement on bank charges earlier this year. The OFT of course have access to evidence from the banks which a customer would never be able to get. I think that from point on you have 'official' confirmation that the charges amount to a penalty, and so I think the five years timescale begins then.

[poltmcm]

This was my argument(OFT statement using it as discovery rule) when RBOS qouted the limitations act to me and i went to court seemed like sheriff was egging me on to continue but there is the problem of it getting taken out of small claims and then into summary cause or possibly ordinary cause which i would have been liable for the banks expenses. i bailed out......soz this would be better tested by a individual on legal aid.

also i can bring this action again as no evidence was heard.

[m'n'bc]

So, in summary, even though there is a 20 - year limit on claims in certain circumstances, because I have paid the penalty charge and was aware of this fact, I would have had to have lodged a claim very soon afterwards to try to recover the penalty charge?

I'm specifically thinking about when I was a student in the dim and distant mid - nineties and going overdrawn by £10 or so from time to time wasn't unknown. The penalty charges sometimes (unfortunately) incurred would make it just that wee bit harder to get back on to an even keel and it becomes an ever decreasing circle.

To cut a long story short, I have found the boxes in which all my BoS statements are kept and there's probably a few hundred pounds in there that I would feel justified in lodging a claim, more through anger than anything else . However, if the time limit is five years back from the date of claim then I can't do anything about it?

Incidentally i don't bank with BoS any more as they managed to make a mess of tax on savings interest for me, resulting in 3 years of tax claims, where I had to pay inland revenue the princely sum of about £8 one year, £12 the next, and I got back a cheque for some pence on the third year!

[Robertxc]

So, in summary, even though there is a 20 - year limit on claims in certain circumstances, because I have paid the penalty charge and was aware of this fact, I would have had to have lodged a claim very soon afterwards to try to recover the penalty charge?

I don't think so. Very simply - Advocate is correct that a 'resonable person' could have found out the penalty charges were unlawful, BUT I would say that there's no way you could have known that the banks charges were actually penalty charges. You have to bear in mind that non of the banks have ever released breakdowns of how their charges are made up, and to this day they swear blind that their charges are 'reasonable'. For me, the key event was the OFT's statement in July which was the first official indication that the banks charges are penalties. I think the the 'reasonable person' has five years from July to make his claim.

[m'n'bc]

Well, I'll probably give it a whirl Robert, nothing ventured etc etc.

The wife will *definitely* have charges to claim though, so if we don't get mine, there should be no issues with hers as they are all fairly recent - within the last five years anyway.

[bfb]

none of the discussion so far on this mentions the question of what the act calls fraud, ie the banks concealing the facts on the charges by maintaining that they were lawful

"reasonable diligence" needs to be taken in context of the reputation of the banks and their self portrayal as prudent professionals over the years
It would have been extraordinarily diligent for anyone to discover the duplicitousness of the banks before the publicity recently, the reasonable person would perhaps have been duped by the publicity

[m'n'bc]

Hiya bfb,

Basically, I think the banks are only concerned about reputations as portrayed in the papers. Since when has a bank practiced AND preached fiscal prudence simultaneously?

I'm about to go slightly off at a tangent here with my thoughts, but will get back to the point in hand in a mo - As I've mentioned I am looking at my charges from when i was a student about 10 years ago. Certainly, BoS gave both myself and most other students I knew tacit approval to run up frightening overdrafts. An overdraft of £1500 was effectively granted without question and was implemented in £500 increments. I remember asking for a limit of £500 and being told that I might as well have the £1500 now to save me coming back later in the year!

£1500 was the maximum you could have without consultation. That's a lot of money for a non-earner. Many more run up far heavier debt with the full approval of the bank. The student market is very competitive - you'll see this when the banks offer railcards, "free £25 in your account" and more recently, iPods etc to 18 year old kids who have never controlled their own finances before except in the most facile way. The flip side for said 18 year olds is on page 4 of a terms and conditions sheet which, rightly or wrongly, might never be consulted or highlighted, but the bank knows that all they have to do is penalty charge the person once or twice and that's the introductory gift cost recouped!

And as for the charges....well, I think of them in the same way as banks withdrawing from "undesirable" areas and sticking in cashpoints in shops which charge you to get at your money. The people who can afford it least are the ones they'll do what they can to shaft without compunction - indeed they depend on it to an extent. It's cynical and morally wrong but some think that it's the fault of the person at the receiving end for not exercising "reasonable diligence" to get to the bottom of what these charges are comprised of.

I had never considered claiming back / launching a claim against until a friend told me about this site a couple of months ago after I had said that my wife had been charged £30 for going a pound or two over her agreed limit for a day. I've found all my old statements and the original query was "is this within a statute of limitations?" 10 years might be pushing it, yes, but I'd feel so bl00dy justified in doing it!!!!

Anyway, rant over. We'll sort out the wifes claim which chould be a certainty before trying my one out .

Incidentally if anyone has had success outwith the 5 / 6 year period, please post to let me know!

[Advocate]

I am afraid not BfB. The "fraud" discussed in the 1973 Act is equated with the requirements for fraud at common law, i.e. the criminal variety. The Banks have been pretty up front about the fact that you would get charged if you breaching your contract (and lets not get too sanctimonious. The charges are only applied when the consumer fails to adhere to the terms of their contract. While harsh to be charged £25 for going £1 or so overdrawn, it seems to me that you cannot rack up thousands of pounds in charges without being at least a little financially irresponsible, if not reckless).

The best argument is that suggested by Robertxc. He is saying that as the Banks have not disclosed the costs involved in administering breaches of contract by the customer, a consumer exercising reasonable diligence could never have known until the OFT report that the charges were penalty charges. The riposte is that that is exactly why we have litigation. People believing they have been wronged and then using the process of litigation to determine the true facts through the process of pleadings and the tools afforded by the process to discover information from the other side. If it appears half-way through that the other side actually has a reasonable defence, it will cost you cash to have found that out, but then you have to settle and pay their expenses.

Whether the banks will actually run with the prescription defence is yet to be seen, but if they do the consumer will be well advised to seek the assistance of a lawyer, or give up. These kind of legal arguments require someone with a knowledge of the law and the ability to argue on the basis of analogy.

Also, if the courts were to allow such a subjective interpretation of the requirements of reasonable diligence, it would open up claims on the basis of peoples' deliberate ignorance, directly contrary to the policy of the Act, which is to ensure that claims are dealt with within a period of time which allows witnesses to remember things and documents to be available.

[Ropey]

Forgive my presumption here. Am I right in thinking, Advocate, that your sole intention in joining this forum was to disuade others from claiming monies unlawfully removed from their accounts by banks?

It seems strange to me that an uninterested party would do that.

[Advocate]

Ropey, this is the law, this is my interest. What I say here is not necessarily what happens in practice, but it is my considered opinion, based on the access I have to pretty extensive legal resources. It is also interesting to get other peoples' take.

I wonder what you think about the fact that a bank is now talking about charging people for simply operating a normal current account. Thin end of the wedge perhaps. Does this mean that those who manage their finances are now beginning to finance these settlements? What then for these consumers I wonder? The Banks make an obscene amount of money, but won't stop recording increased profits. Somebody pays.

I don't have any bank charges and it perhaps helps to have a bit distance mate.

[bfb]

some points

If the banks have been relying on unlawful charges and interest on these to fund free banking then there is something wrong at the core of their business

the questions of fraud or error are open to interpretation and the commentary in Johnston on Prescription and Limitation is less definitive than your opinion. The fact that the banks are perfectly upfront fall neatly into the provisions of 6.(4,a,ii) of the act in inducing error

Similarly the interpretation of reasonable diligence is subjective by its very nature and must rest on the facts and circumstances of each case That is a very long way from wilfull ignorance

finally it is quite possible to rack up penalty charges with no fecklessness in a vicious circle initialted by the bank

[Advocate]

BfB

1st: I doubt the banks have been "relying" on charges to fund free banking, although they have no doubt enjoyed the increase in profits that these charges have provided. Their constant and overrding duty is to their shareholders and if profits were to fall as a result of payments then pressure falls on the directors. They will do what they can to ensure this does not happen (and indeed are legally bound so to do). This may mean beginning to charge for basic services, as happens in most other European countries.

2nd: The law on prescrirption, as in many other areas, is not definitive and relies on argument by analogy. The banks are not guilty of "fraud" as they have not gained an advantage by deliberate concealment of anything, and proving that in court would in any case be a very tall order. They have been upfront about the charges that apply on default and the fact that they are now being challenged as unlawful does not alter this fact of openness.

3rd: they have not induced error as they have never stated they they are lawful, merely that they believe their charges to be so. This then puts the onus on the party who belives they have been wronged to challenge their belief by raising an action. The error must be induced by the defender and this would require the Banks to do something more than simply assert their opinion. It comes down once again to the individual responsibility of the individual to take action if they are of a different opinion, which of course many people are now doing.

4th: One or two bank charges can cause a difficulty, but how do you manage to get one in the first place. There must be a degree of mismanagement, albeit perhaps excuseable in our incrasingly complex working and social lives . People either do not have enough money to pay a direct debit they themselves instructed; have themselves written a cheque without ensuring there was enough money in their account (perhaps itself a fraud if done knowingly); or used their switch card again without checking or perhaps maybe knowing they do not have enough money/authorised overdraft to cover it. That, I am afraid, is personal responsibility.

5th: I note you do not express an opinion on the possible adverse consequences for those who have managed their finances and operated within their means. I think in the context of a discussion of the unconsciounable conduct of the Banks it is worth asking just how righteous the position of claimants is vis a vis other parties who will then suffer as a result of their breaches of contract.

I look forward to your response.

[bfb]

I will not comment on certain aspects I believe you are not disintereste

If institutions are increasing returns to shareholders by unlawful means that is wrong. If they are forced to return the ill gotten gains then the consequences must be borne

You are deliberately decontextualising the position with regard to error and fraud Being upfront does not preclude fraud

I have had bank charges caused directly by bank mismanagement leading directly to other consequences

The money is being paid back by the banks because they should not have had it in the first place, if they were entitled to it then they should keep it.
If the refunding of the money causes banks problems elsewhere, then it is the bank which has caused those problems not the person to whom they are repaying the money.

[Robertxc]

This is an excellent debate, and exactly what we like to see on the forum. There are some outstanding contributions, and excellent arguments all round (especially mine ). It gives people the opportunity to see different sides of a situation, and then make up their own minds about what to do. PLEASE KEEP IT FRIENDLY!

Advocate, I think you've touched upon quite an interesting point here:

One or two bank charges can cause a difficulty, but how do you manage to get one in the first place. There must be a degree of mismanagement, albeit perhaps excuseable in our incrasingly complex working and social lives .

In this age of computerised banking, the concept of an 'unauthorised overdraft' appears to be quite anomolous. You would have to accept, I think, that no money leaves the bank under any circumstances without their authorisation. When a request to pay a Direct Debit is made on a particualar account, the bank is entirely free to pay it or not, depending on how much money is in the account. How then can any ensuing new level of overdraft be said to be 'unauthorised'? Granted, the bank is obliged to honour a guaranteed cheque (although we're not sure if it's a legal obligation), but they're still free to withdraw cheque facilities at any time.

There was a time when it was possible to withdraw cash from a cash machine at one bank, and then go to another to withdraw the same amount, because the system weren't working in 'real time', thus it was possible to exploit the inherent latency in the system to cause a truly 'unauthorised overdraft'. But those days are long gone. When the bank's computer gets a request for a payment, it doesn't care if it's for a Direct Debit or a Switch payment, it simply looks up the set of rules which apply to that particular account (overdraft level etc.), and either makes the payment or doesn't. At all times, the bank controls the level of borrowing, not the customer.

[Advocate]

Robertxc,

The legal analysis of the matter is thus: The customer instructs the bank to make payment to a third party by the bank. As long as they are in credit, the bank is contractually obliged to make the payment to the third party. If the customer is not in funds, the customer is then in effect offering to borrow from the bank on the pre-advertsied rates for unauthorised borrowing. I think this would be a new contract, or at least a variation on the existing one. If the bank makes the payment, it is accepting to enter into a new contract or vary the existing contract on the terms offered by the customer.

You seem to be suggesting that the customer has no responsibility in this transaction and the bank, by making it easy for this kind of borrowing, is fully responsible. Contracts are bilateral, that is they require two parties and an agreement on the essential or material terms of the contract between them. This is what happens in this situation and the bank is merely responding to an offer by the customer to borrow on the publicised terms.

The fact that the acceptance is effected through a computer program makes no difference to the legal classification and effect of the customer's actions. It merely makes it easier and faster. The customer is still the party making the first move and surely has a responsibility to ensure either that they have enough money to cover the payment in their account/authorised overdraft, or that they are content to contract on the terms previously pubslihed by the bank for such circumstances.

The question of whether the charges applied are then unlawful is a separate legal point and stems from a recognition by Parliament that the power of the banks in such contracts is skewed in their favour and there requires to be mechanisms to control contractual relationships where the imabalance of power is as vast. Whatever the answer to this question, it cannot absolve the customer of their own responsibility in instructing the transaction in the first place.

[Advocate]

BfB

I agree that banks ought not to be able to inflate profits through any means other than those which are lawful. I was not commenting on the morality of the practice, rather the practical effect of banks having to make these payments. Yes, the price must be borne, but unfortunately for those who service their accounts within the terms of their agreement with the bank, it is those persons who will end up paying the price. The moral righteousness of the claimant may have foundation as against t