Who will be so kind as to check this -
STATEMENT OF EVIDENCE
1. The claimant submits that the charges levied to his bank account, as set out in the enclosed schedule, are, notwithstanding the defence of the defendant, default penalty charges imposed because of and relating directly to breaches of contract, both explicit and implied, on the part of the claimant. As a contractual penalty, the charges are unenforceable by virtue of the Unfair Terms in Consumer Contracts Regulations 1999, the Unfair Contracts (Terms) Act 1977, and the common law.
2. It is admitted that the Defendants charges were levied in accordance with the terms and conditions of the account in question. However, it is submitted that the Defendants charges are not related to or intended to
represent any actual loss arising from a breach of contract, but instead unduly and extravagantly enrich the Defendant which exercises the contractual term in respect of such charges with a view to profit.
3. The breaches of contract in this case relate to exceeding overdraft limits, and having insufficient funds
available to pay a direct debit or a standing order. On one occasion in June 2006 , due to my account
temporarily exceeding my overdraft limit by just few pounds I was penalised three times in just three days for these breaches by way of a charges totalling £90 . The claimant holds these charges and indeed every other charge in question, to be punitive in nature, and wholly disproportionate.
4. The law states that a contractual party cannot profit from a breach and the charge for a loss suffered from a breach of contract should be the amount necessary to put both parties in the same position before the breach occurred. This means that Liquidated damages should be charged. This is backed up by case law – Robinson Vs Harman 1848.
5. It is settled law that the charge for loss or damage arising from a breach of contract must be proportionate to the loss incurred.
6. Lord Dunedin stated in the case of Dunlop Pneumatic Tyre Co v New Garage & Motor Co 1915 -
“the sum is a penalty if it is greater than the greatest loss which could have been suffered from the breach” and;
“The essence of a penalty is a payment of money stipulated as in terrorem of the offending part; the essence of liquidated damages is a genuine covenanted pre-estimate of damage”
7. Further, under the Unfair Terms in Consumer Contracts Regulations 1999, schedule 2 (1) includes to define an example of an unfair clause as;
(e) requiring any consumer who fails to fulfil his obligation to pay a disproportionately high sum in
8. It is not disputed that the Defendant is entitled to recover its damages following the claimant’s breach of
contract, and it is entitled to include a liquidated damages clause.
9. In order to ascertain whether the Defendant’s charges are an unenforceable penalty or are liquidated
damages, the true costs incurred by the Defendant need to be thoroughly examined to establish whether or not the banks charge represents a genuine pre-estimate of its likely loss incurred by my contractual breaches.
10. On numerous occasions, the Claimant has requested that the Defendant justify its charges by providing details of the costs incurred as a result of my contractual breaches. Each time those requests were rebutted or ignored.
11. In a recent study undertaken in Australia, (Nicole Rich, “Unfair fees: a report into penalty fees charged by Australian Banks”) it was estimated that the cost to an Australian Bank of a customers direct debit refusal was estimated to be in the region of 54 cents. By reviewing the banks’ charges against the above figure, the study estimated that banks could be charging between 64 to 92 times what it costs them to process a direct debit refusal. The study’s key findings stated that in its opinion the Australian Bank’s cheque and direct debit return charges were likely to be penalties at law.
12. Further, in an American study (Consumer Federation of America “Bounced Cheques: Billion Dollar profits II”) it was estimated that the American banks’ cost to process a returned direct debit payment was between US$0.48 and US$0.65.
13. The Defendant, or indeed any of the UK banks, has never published any information to support how their charges are calculated, or what their actual costs associated with such breaches are, or what revenue they derive from such charges.
14. For their recent BBC2 documentary “The Money Programme”, the BBC appointed a commission of former
senior banking industry figures and business academics to attempt to ascertain the actual costs to the UK banks of processing a customer’s breach of contract. They concluded that the absolute maximum conceivable cost that could be incurred by a direct debit refusal or overdraft excess is £2.50, and of a returned cheque £4.50. They did state however, that the actual cost is likely to be much less than this. The commission also estimated that the UK banks collectively derive as much as £4.5billion in profit a year from their charging regimes.
15. It is submitted that the Defendants charges are applied by an automated and computer driven process. It is therefore impossible to envisage how the Defendant can incur costs of £20-35 by carrying out a completely automated and computer driven process. This process consists of a computer system ‘bouncing’ the direct debit, and sending out a computer generated letter.
17. Additionally, I asked the Defendant to provide me evidence of any manual intervention that may have occurred in relation to my account, under a Data Protection Act 1998 right of subject access request. No such information was forthcoming.
18. The claimant also cites a radio interview in 2004 with Lloyds TSB’s former head of personal banking, Peter McNamara, in which he states the charges are used to fund free banking for all personal customers as a whole.
19. The claimant cites the statement from the Office of Fair Trading (April 2006), who conducted a thorough
investigation into default charges levied by the British financial industry. While the report primarily focused
on Credit card issuers, the OFT stated that the principle of their findings would also apply to Bank account charges. They ruled that default charges at the current level were unfair within their interpretation of the UTCCR’s.
20. On 22nd May 2006, the house of commons passed an early day motion which welcomed the OFT's statement that default charges should be proportionate to the actual loss incurred. The house discribed such default charges as "exorbitant" and "excessive".
21. Further, under the UTCCR:
5. - (1) A contractual term which has not been individually negotiated shall be regarded as unfair if, contrary to the requirement of good faith, it causes a significant imbalance in the parties' rights and obligations arising under the contract, to the detriment of the consumer.
(2) A term shall always be regarded as not having been individually negotiated where it has been drafted in advance and the consumer has therefore not been able to influence the substance of the term.
(3) Notwithstanding that a specific term or certain aspects of it in a contract has been individually negotiated, these Regulations shall apply to the rest of a contract if an overall assessment of it indicates that it is a
pre-formulated standard contract.
(4) It shall be for any seller or supplier who claims that a term was individually negotiated to show that it was.
Schedule 2 also includes such clauses (to define examples of unfair clauses) as:
(i) irrevocably binding the consumer to terms with which he had no real opportunity of becoming acquainted before the conclusion of the contract;
(j) enabling the seller or supplier to alter the terms of the contract unilaterally without a valid reason which is specified in the contract;
(m) giving the seller or supplier the right to determine whether the goods or services supplied are in conformity with the contract, or giving him the exclusive right to interpret any term of the contract.
22. The defendant is a multi-national corporation. The term regarding charges was inserted unilaterally in
contract. The contract was pre and mass produced and I had no opportunity to negotiate the clause, or indeed any of the contract.
23. The cost of Barclays charges have increased twice during the period in which my account was held, neither time was I given the opportunity to negotiate, or even notified of this increase. This means the bank has
unilaterally altered the terms of my account contract to my detriment, and to their advantage.
24. As pleaded above, the Claimant believes the charges levied to his account to be disproportionate
contractual penalties. The Claimant will vehemently refute any contention that they are legitimate contractual service charges which are as such not required to be a pre-estimate of loss incurred on the part of the Defendent. The Claiment believes any such contention to be an attempt by the Defendent to 'cloak' its penalties, in order that it circumvent the statutory and common law provisions which prohibit contractual penalty charges with view to profit.
25. The Claimant submits to this honourable Court that a charge of £25, £30, £35 etc (whatever is applicable) for the administration resulting from the Claimant going over his authorised limit by £1 is,nt reasonable by any stretch of the imagination. The same can be said for a charge of £30 for an item returned unpaid.
Furthermore the charges regardless of their de facto nature are unfair by virtue of Reg 5(1) of the UTCCR. Particular ref is made to the fact that any term of contract which purports to allow the Defendant to levy the charges to the account, contrary to the requirement of good faith causes a significant imbalance in the parties " rights and obligations", arising under the contract to the detriment of the Claimant , who in this case is a consumer.
26. The Claimant refers to the statement from the Office of Fair Trading (April 2006). With regard to the ‘cloaking’ or disguising of penalties, the OFT said this;
“4.21 The analysis in this statement is in terms of explicit, transparent default fees. Attempts to restructure accounts in order to present events of default spuriously as additional services for which a charge may be made should be viewed as disguised penalties and equally open to challenge where grounds of unfairness exist. (For example, a charge for ‘agreeing’ or ‘allowing’ a customer to exceed a credit limit is no different from a customers default in exceeding a credit limit.) The UTCCR’s are concerned with the intentions and effects of terms, not just their mechanism”.
27. However, and without prejudice to the above, in the event that the charges were accepted as being a fee for a service, the claimant submits that they are unreasonable under section 15 of the Supply of Goods and Services Act 1982.
28. As set out above, the Defendant’s charges cannot be considered to be liquidated damages, nor contractual service charges. They are not a pre-estimate of, or in any way related to, the Defendant’s loss incurred as a result of the breach of contract. The charges are punitive, and unduly, substantially and extravagantly enrich the Defendant. As such, they are disproportionate contractual penalties and unenforceable at law.
I, the Claimant, believe all facts stated to be true.