A Judge's View on the Test Case

[Rathercross Charlie]

Might be completely wrong, but a friend of mine who's a District Judge told me that the current thinking on the Bench is that the Bank's will lose, now that's a cheery New Year thought!!

[mrmarmite]

to be honest i cant see how they can win BUT any of u lot noticed on bank statements (abby is mine) for example, before it said unpaid direct debit CHARGE £xx.xx now it shows unpaid direct debit FEE

 

me finx they a bit late in changing 1 little word ! ! ! !

[Aequitas]

Having joined this forum to question the idea that bank's charges were a penalty and suffered a baptism of fire (see - http://www.consumeractiongroup.co.uk/forum/general-consumer-issues/92975-bank-charges-penalties.html ) I hesitate to enter the lists again. However, I feel I must ask why everyone seems so confident that the banks will lose.

[Lula]

I suppose one could turn around and ask you why you think that they might win?

[Bigmac versus]

If the OFT win this case as i suspect and the court rules that the charges are a result of breaches of contract which will make them subject to the rules in fairness of the Unfair Terms in Consumer Contracts Regulations the OFT will still have put a case forward that the charges are too high and dont reflect their actual costs invloved. This would no doubt take many months to be resolved and this is the stage I see as critical to those who are to claim back charges because the waiver which is allowing banks to have cases stayed or sists applied SHOULD be lifted and this is the stage where everyone will continue to court. The banks will IMHO have no choice but to pay up on these cases until such times where the OFT come up with their amount of fairness probably around £12.

[Aequitas]

Obviously the issue is not clear cut – if it were clear cut then the case would not be necessary. There is no law that says that banks cannot make charges for banking services and no law that regulates the level of bank charges or says on what basis they should be calculated. Because bank charges are a rip-off people feel that they ought to be unlawful. This leads them to hunt around for laws that they think may apply. The problem is that those doing the hunting may not be legally trained. Now, I am not so arrogant a lawyer that I think that the non-lawyer is incapable of discovering the law on a given matter. It is rather that there is a danger in homing in on specifics if you do not know the basics. Even within the law, no sensible lawyer specialising in one area will give advice in another - even if he has studied the basics as a law student. (This leads me to wonder why, as a property lawyer, I am foolish enough to get involved in discussions about banking law! :o )

 

 

There seem to be two main lines of argument:

 

 

The first is that bank charges are penalties. I have explained in the thread mentioned above why I do not think that they are and do not propose to go over the argument again.

 

 

The second is that bank charges fall foul of the Unfair Terms in Consumer Contracts Regulations 1999. Assuming that the argument is about the level of charges and not whether banks should be able to make charges at all, then the Regulations themselves have the answer since Regulation 6 (2) says:

 

 

...the assessment of fairness of a term shall not relate...to the adequacy of the price or remuneration, as against the goods or services supplied in exchange

 

A while after starting the thread referred to above, I had the occasion to discuss this question with an experienced commercial lawyer. His take was this: if it was the case that a bank's terms and conditions applied only to contracts that had been negotiated with one or two customers then they would almost certainly be enforceable; should the situation be any different because there are in fact millions of such contracts? The answer to that lies in considering the law relating to competition, cartels and abuse of monopolies, rather than in the law of contract. The law allows a man to drive a hard bargain, but is always keen to have a close look at situations where there is an imbalance of bargaining power between the parties. The outcome of the case may depend on where the court draws the line.

 

My politics lie rather left of centre and you will find me on the barricades defending consumer and workers' rights, equal opportunities and all the rest. However, for better or worse, we live in an essentially capitalist society. Many involved in the discussion of bank charges simply fail to take into account commercial reality and are looking at what banks do in a vacuum. Banks provide many services: they take money from one set of people and lend it to another; they give investment advice; they provide financial services; and of course they offer banking services. The suggestion implicit in the idea that banks should not charge more for banking services than the actual cost is that banking services should not be run at a profit and/or should be financed by banks' other activities. This is rather like saying that supermarkets can make a profit on meat, but not on vegetables.

 

Of course what happens in practice is that the free banking available to those who remain in credit is paid for by those who do not. What is conveniently forgotten is that this situation has arisen because of consumer pressure for free banking. When I had my first bank account in 1970 you paid a charge for every transaction. We may return to something like that. I fear that if the banks lose it will be something of pyrrhic victory for consumers.

[Lula]

Congratulations on a well thought out, non confrontational argument, and for rmaking me laugh with your comment about being a property lawyer commenting on a banking case

 

I am not going to argue with me because in some ways you are right, if they loose out on this they will try and make up the lost revenue elsewhere.

 

As an aside, when was "free banking " first introduced, because i am sure that when I first had a current account in the early 80's I was charged per cheque/transaction.

[Bookworm]

I am not going to argue with me.

Well, that'd be a first.

[Lula]

ROFLMAO

 

Actually I dont win when i argue with myself, but you all know what I meant

[Bookworm]

The suggestion implicit in the idea that banks should not charge more for banking services than the actual cost is that banking services should not be run at a profit and/or should be financed by banks' other activities. This is rather like saying that supermarkets can make a profit on meat, but not on vegetables.

I don't think anyone is saying that at all. Banking services should be - and are - run at a profit. What is being argued is that the charges levied for breaching the account should not create a profit for the bank, which is a different matter. The way you describe things here is precisely what the banks are trying to make out, i.e that the charges are for a service, not a penalty and that they therefore can charge what they want.

 

I have yet to see one person to say that they don't think the banks should make a profit. What they make the profits on is what this is all about.

[mrmarmite]

my turn, it always the low earners that get scrwed, people like property lawyers make shed loads so they never get charges.

 

other side i dont mind paing a reasonable charge £10 for example but the prob is if you get 35 bounced debit and another 25 over limit the low income earners find it VERY hard to replace the 55 whe it gety taken out the following month, THEN they end up with more charges and by month 4 you got over 200, it causes a knockon effect for the people that cant afford it, next thing you know you got a 1k overdraft, my account for example, so far abbey taken 2500 in charges, i have done well so far but overdraft sat on 950, it got to point that when they take charges out the following month i cant afford to pay my mortgage,

i just dumped abbey till OFT case sorted opened a bank account some where else with 0 overdraft and so far i'm doing ok

 

it's the knock on effect that causes most probs, they bounce a debit but by god they will take you overdrawn to get their charges and then charge you another 30 for them taking the money out

[patrickq1]

the basis of the bank should not charge any more than cost is about right ,the banks have a borrowing of 3000 from my gran ma they prommised to invest this money for her to get a better return,the bank paid out -1 ,700 pounds

so she lost money now she is 92 yeas old ,they have not told her what investments they made yet the same bank made overall profitts of 2.9 bill ,banks lend money for profitt ,is that not enough,the supermarket buys and sells for profitt just because you ordered your meat on the friday but did not collect till the following monday is it correct that the supermarket should then penalise you for this

[mrmarmite]

yes i see and agree every 1 gotta make a profit at end of day, banks are making a profit for nothing and high charges just drive more and more people into debt so then they cant go and spend that money on shooping,

 

1 little mistake cost you £55, £55 is near as the average food shopping bill for 2 people over 1 week

 

its GREED not profit, it known fact that banks real cost for bouncing cheque is £2.50 MAX you get charged £55

 

as said it's greed and nothing more !

[mrmarmite]

some hospital car parks are the same, southampton for example they made millions last year out of the missery and suffering of sick/ill people

[mrmarmite]

it think that little bit of problem is pay rises, every one in bank on good wage and have no idea on our side of life where every day it's a loosing battle.

wages every 1 normaly get a % pay rise say 3% when you earning 40-50k that bloody good, when you earning 10-12k its nothing, the result is the pay gap is getting bigger and bigger each payrise, us low income get forgotten about, like where i work we asked managment to do pay review on merit not % it makes it more fair all around than increasing that gap further,

 

it's all a knock on effect and we getting left behing

[mrmarmite]

at end of day, banks make money on interest on high paid people, those high paid people never get charges, they dont make money on low income and they know those people will get charges so they make money from us that way

[Bigmac versus]

It is really quite simple the banks didnt ask the OFT to take them to court the OFT took them to court, the banks have had ample opportunities to defend themselves in thousands of cases and didnt. This talk of banks not being allowed to make a profit is a no goer they make vast amounts of profit and the money taken from charges is a very small portion of that profit so it is quite clearly greed where charges are involved. In my honest opinion the banks have known this for some time but have year on year increased these amounts to swell their coffers and now they have been asked to show their losses in reflection to a breach of contract Banks have refused to do so, this is quite simply because they DO NOT reflect the charges that are being applied. The banks used to be helpfull years ago but the industry is more geared towards profit than customer relations these days and this is shown every day when we are asked if we want credit cards, loans or to change our mortgage supplier, if i did i would have asked so. What about all the profit the banks have made from having all our charges over the years and turning them into loans to others or investments......isnt that unjust enrichment?

Treat them as they have treated you over the years.

[mrmarmite]

nice post Bigmac, whilst us lot say they got no chance of getting away with this, there is always a little niggle of worry. it total i got over 3k on this, and it will pay most of my debts and catch up as been 1 month behind on mortgage since jan last year.

 

just hope they dont do same as credit card, ok will give you back the differencem but then again they still getting taken to court today

 

it's about time us (low lifes (as we seem to be) ) had a break,

[Aequitas]

Just for the record, I should like to say that, whilst I worked as a property lawyer, I was always an employed property lawyer and never earned shed loads of money. Also, whilst I cannot honestly say I have ever been poor, there have been times when I was short of money and have been subject to bank charges that I thought were, if not in themselves unfair, then certainly applied because the bank had manipulated the situation to their advantage to increase their charges. I add that I am perfectly aware that for many the amount they lose in bank charges can make a huge difference to their weekly budgets.

 

I find myself in a difficult position because, whilst I agree that bank charges are too high and often unfairly applied, I am not convinced by the arguments I read that they are unlawful.

 

The fact that a point of view is argued repeatedly and with passion does not mean that it is correct.

 

The fact that the banks were unwilling to engage in litigation over their charges does not mean that the arguments advanced by customers who had their charges refunded were correct.

 

There is, quite understandably, a lot of anger over bank charges. What I am trying to do is to get people to put that anger to one side and consider whether the banks have a legal case to answer.

 

What I found very instructive was the reaction on sites such as this to the decision in this case: http://tinyurl.com/2gh9bb I urge anyone who has an interest in bank charges and who has not read the case to do so. One notable thing about the case was that the bank won even though it did not appear in court. The case fired a warning shot over the bows of consumers, but people had convinced themselves that bank charges were unlawful and seemed to be unable to come to terms with the judgment. The judge may have been wrong, but his points were just not addressed - they were ignored. Instead, everyone took comfort in the fact that as it was a county court judment it was not binding.

 

I emphasise that I am just expressing my opinion and that that opinion is arrived at from an imperfect knowledge of the relevant law - I hope that those who hold an opposing opinion with an equal lack of knowledge will concede that they may be wrong. The QCs who argue the law will express opposing opinions and, when the case has run its course through all the appeal stages, which it surely will, the law will be what the judges say it is. If, for whatever reasons, the judges come down on the side of the consumer I shall be one of those raising three cheers.

[noomill060]

Ah yes, the Berwick case.

 

It was discussed ad nauseam on here at the time.

[noomill060]

There was another case not long after where banks started to defend claims, citing the Berwick case.

 

CAG and moneysavingexpert.com hired a QC specialising in banking law to tidy up the applicant's inadequate POCs and represent them.

 

All the bank backed down and coughed up.

 

A few weeks after that the test case was announced and most claims stayed.

[noomill060]

Berwick's PoCs were so laughably weak that the Judge really had no alternative but to find against him.

 

His PoCs were not those provided in template form on this site, but it served as a reminder to those who had grown complacent, assuming victory was as easy as Martin Lewis's early prognostigations had made it appear and that the law is not something to be taken lightly.

[Bookworm]

Well, I had a barrister against me in my Barclays case (stay) and we actually had a good chat before and after, and it turns out he was reclaiming his charges himself using the same principle, so I'm thinking he knew what he was talking about.

 

I could also point out that I *did* win in court previously, not by default, but on view of the evidence in front of him (including a copy of the T&Cs), the judge ruled in my favour and found that the charge was a penalty, back in November 2006. Granted, it wasn't a bank, but a car finance company, part of a bank group, but I had used the same principles and arguments as I had with the banks. Sadly, the media didn't pick up on that the way they did on the first loss amongst the thousands of wins we had had. :-|

 

Maybe now would be a good time to point out that we do have legal people on board too, not only non-lawyers. ;-)

[noomill060]

The Judicuary were growing tired of the Banks entering faux defences which they had no intention of allowing to be heard in Court.

 

It appeared to me that, when the Banks had a perfect opportunanty to put their case before a judge and bottled it, the Judiciary howled "enough, already!" and put the FSA/OFT on notice that a test case would be need to be imposed, as the bank's abuse of the court system was causing a almighty log jam.

 

The banks were only too willing, as the carrot dangled enabled them to cease handling complaints, while still inventing debt where none really existed.

[noomill060]

During a chat with the ICO about SAR non-compliance, the ICO guy told me he was also claiming his charges back, about £200 he said.

 

I asked him if that included interest levied, "no" he said, and was delighted when he realised this was as reclaimable as the charges themselves!

 

(Naturally, I directed him to this site)