Thread: Bank charges–EC law–Fairness–Unfair contract terms

From Law Society Gazette

Bank charges are deemed Unfair contract terms
Consumer law


Thursday 12 March 2009

Bank charges – EC law – Fairness – Unfair contract terms
Abbey National Plc & seven ors v Office of Fair Trading: CA (Civ Div) (Sir Anthony Clarke, Master of the Rolls, Lords Justice Waller (vice-president), Lloyd): 26 February 2009
The appellant banks appealed against a decision ([2008] EWHC 875 (Comm), (2008) 2 All ER (Comm) 625) that the respondent Office of Fair Trading was entitled to assess the fairness of certain bank charges.
The charges comprised unpaid item charges, paid item charges, overdraft excess charges and guaranteed paid item charges (the relevant charges). The charges were made when the banks were requested or instructed by customers with current accounts to make a payment for which the customer did not have the necessary funds and which was not covered by a facility arranged with the customer. The issue was whether an assessment of the fairness of the relevant charges related to ‘the adequacy of the price or remuneration, as against the goods or services supplied in exchange’ within regulation 6(2)(b) of the Unfair Terms in Consumer Contracts Regulations 1999, in which case such an assessment would be precluded.
Held: It was common ground that the 1999 regulations were to be construed so as to give effect to the terms and purpose of Council Directive 93/13. It followed from the reasoning of the House of Lords in Director General of Fair Trading v First National Bank Plc [2001] UKHL 52, (2002) 1 AC 481 that what article 4(2) of the directive was seeking to exclude from the assessment required by the national authorities (here the OFT) was the core bargain or the core price but not ancillary or incidental provisions, First National Bank applied. Regulation 6(2)(b) should be so construed. That view was supported by the travaux preparatoires to the directive and by numerous academic writings. It was therefore necessary to decide whether the relevant charges were part of the essential bargain between bank and customer.
Having regard to all the circumstances, the answer was no. The contingent nature of the charges and the fact that the relevant terms were not specifically negotiated were strong pointers to the conclusion that the charges were not ‘the price or remuneration’ within the meaning of article 4(2) of the directive and regulation 6(2)(b) of the regulations. Accordingly, an assessment of the fairness of the relevant charges was not excluded by regulation 6(2)(b).
Appeal dismissed.

Its currently under appeal to the HoL. That article is a good summary btw. The documents have to be handed into the HoL by Wednesday at the latest.

Can anyone please advise if and how the unfair contract issue may apply to an impecably maintained credit card account opened in 2002 where interest rates have doubled over time and the cardholder is no longer able to afford the demanded monthly minimum payments? Comment will be appreciated.

Just to let you know that I got the above case notes from the Law Society gazette. The link is below. It was given to me by a solicitor in the law centre, when I asked him for a copy of the article which he had on the desk, but his copier broke down that day!

The link may be useful for other articles too.

www.lawgazette.co.uk