A Judge's View on the Test Case

[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.

[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.

[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.