OFT test case

[Aequitas]

Assuming it were the case that:

 

 

1. Banks had a straightforward charging structure that made it clear what their charges were and in what circumstances they were payable
   
2. Their terms and conditions complied with the UTTCR (and remember that the UTTCR says: “In so far as it is in plain intelligible language, 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.”)
   
3. They only charged where they actually provided a service (and remember that that would leave no room for any argument that any of their charges were penalties because no charge could be taken to be liquidated damages for breach of contract).
   

On what legal grounds could anyone challenge the level of bank charges?

 

 

Which bank charges currently being made would disappear?

[car2403]

Assuming it were the case that:

 

1. Banks had a straightforward charging structure that made it clear what their charges were and in what circumstances they were payable
   
2. Their terms and conditions complied with the UTTCR (and remember that the UTTCR says: “In so far as it is in plain intelligible language, 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.”)
   
3. They only charged where they actually provided a service (and remember that that would leave no room for any argument that any of their charges were penalties because no charge could be taken to be liquidated damages for breach of contract).

On what legal grounds could anyone challenge the level of bank charges?

 

 

Which bank charges currently being made would disappear?

 

If that were the case, probably none as they would be fair, reasonable, just and lawful in those circumstances.

 

The only place I can think of, if this were true, would be the "multiple charges in one day" issue and the further issue of compound interest on those charges, IMHO.

 

Of course, this is all conjecture, as that isn't the scenario we're in.

[caro]

Wth respect as a publicly funded government department the OFT's limited budget simply wouldn't extend to hiring the services of a top ranked QC.

 

I confess that I hadn't heard of Brian Doctor before, but then I'm not that au fait with most QCs but looking at his cv I'm pretty impressed. Can you elaborate as to why you think someone else should/could do it?

[JOSH_IOU]

BANK REFUNDS IN 2007

 

 

Barclays - £87m

HSBC - £116m

HBOS - £79m

Lloyds TSB - £36m

RBS - £81m

 

[JOSH_IOU]

These figures read as if they were totted up on the back of a fag packet

 

 

Angela Knight, British Bankers Association

 

[JOSH_IOU]

Why this is "NOT" an "EASY" fight. In there own words.

 

 

The British Bankers' Association:

The British Bankers' Association (BBA) is the principal trade association for banks operating in the UK. It is a leading representative body in the financial services sector and has over 200 members, as well as many associate members, which fund its not-for-profit activities. Members of the BBA manage around 90% of UK banking assets.

The UK banking sector contributes significantly to the UK and its economy:

 

 

Banks and financial services provide over 1m jobs

 

Banks and financial services contribute £70bn to the UK's national output (6.8% of GDP)

 

Banks and financial services provide 25% of total corporation tax (£8bn) to the UK Gov

 

The main retail banks provide over 125m accounts, clear 7bn transactions a year and facilitate 2.3bn cash withdrawals per year from its network of over 30,000 free ATM's (Very very interesting.)

 

 

Banks provide cost-effective banking services to 95% of the UK's population

 

In 2005, 24m personal customers registered to access their bank accounts online, while 42 million are registered to access their accounts by telephone

 

Since April 2003, banks have opened a net total of 1.8m Post Office-accessible basic bank accounts

 

Banks in the UK contribute well over £100m per year to charities and local community initiatives

 

Five UK banks are in the top 15 firms listed in the DTI's recent 2006 Value Added Scoreboard of Wealth Creating Companies

 

The value of foreign exchange business passed through London every day is £560bn ($1 trillion)

 

The UK not only enjoys one of the most competitive, efficient and secure banking systems in the world, but is one of the cheapest countries in the world to bank - with 'free if in credit' banking. At the same time, the financial sector's productivity is increasing at a rate of three times to that of the UK economy as a whole and will account for an increasing share of the UK economy and GDP growth, providing the regulatory and tax environment does not deteriorate. The UK continues to be the largest single centre for international banking.

[Son of Shoestring]

With respect, I feel you are rather missing my point.

 

 

One of the remedies for breach of contract is the award of damages. The purpose of damages for breach of contract is to put the non-breaching party in the same position he would have been in had there been no breach, but the non-breaching party is not allowed to make a profit out of a breach. It is not necessary to provide in a contract that damages will be payable in the event of a breach because it is an established legal principle. Some contracts have a provision for liquidated damages to be paid in the event of a specified breach or breaches. If the amount specified is not a genuine pre-estimate of the loss which will result from the breach it will be a penalty.

 

 

This is quite different from agreeing a price for goods or services that is excessive in the sense that it exceeds what many would consider to be a reasonable price.

 

 

Say you go to your bank to arrange a transfer of funds abroad and they tell you the fee is £20. It may cost the bank only 10p to effect the transfer and in that case you may consider the fee excessive. If you arrange the transfer you have to pay the fee. Since there is no question of a breach of contract on your part there can be no question of the fee being a penalty.

 

 

Let's assume for the sake of argument that the charge your bank makes for going into the red is, on a correct interpretation of your contract with the bank, liquidated damages for breach of contract; that the cost incurred by the bank in connection with the breach is 10p; and that the charge is £2. You may consider (particularly having regard to the amount that banks actually charge) that £2 is entirely reasonable. Nevertheless, it is still a penalty because the amount at which the fee was fixed was not a genuine pre-estimate of the bank's loss.

 

 

So, the fact that you may consider an amount payable in respect of liquidated damages to be reasonable does not of itself mean that it is not a penalty and, equally, the fact that you may consider a charge to be excessive does not of itself mean that it is a penalty.

 

While I respect the point you are making, in the bank charges case, the banks clearly recognise that their charges are unlawful, as witnessed by their unwillingness to defend their position in hundreds of thousands of small claims actions.

 

Also, we already know from a bank whistleblower that an automatic intervention to bounce a DD costs the bank concerned just pennies on the pound, whereas a manual intervention costs around £2-2.50. While these costs are tied to a given bank, they non-the-less indicate a sector-wide ball park figure.

 

One can only assume that banks to decline to defend themselves, as doing so they would be required to show their true costs -- something they apparently are not willing to do ---- at a cost of several hundreds of millions of pounds (BBC estimate, I believe) of the accrued repayments of charges repaid by the banks. This decision, I suspect, is factored on the probability that no matter what happens, the bulk of customers won't bother to take out an action against them (we humans are by nature a lazy crew).

 

There is also the problem with the banking industry acting as a cartel (in my view) wherein the customer, even if he transfers his banking to another institution, is non-the-less "clobbered" by a similar range of charges. This removes from the individual any opportunity to have access to other banking services (a vital need these days - and comparable to the utilities, in my view) where they costs of doing business might be considered fair and reasonable in so far as charges are concerned. Under this scenario, there is no de facto "agreeing" to charges for gods and services, as the available choice is, merely, to choose which bank you prefer to be mugged by.

 

Shoestring

[Justforfun]

Why this is "NOT" an "EASY" fight. In there own words.

 

 

The British Bankers' Association:

The British Bankers' Association (BBA) is the principal trade association for banks operating in the UK. It is a leading representative body in the financial services sector and has over 200 members, as well as many associate members, which fund its not-for-profit activities. Members of the BBA manage around 90% of UK banking assets.

The UK banking sector contributes significantly to the UK and its economy:

 

 

Banks and financial services provide over 1m jobs

 

Banks and financial services contribute £70bn to the UK's national output (6.8% of GDP)

 

Banks and financial services provide 25% of total corporation tax (£8bn) to the UK Gov

 

The main retail banks provide over 125m accounts, clear 7bn transactions a year and facilitate 2.3bn cash withdrawals per year from its network of over 30,000 free ATM's (Very very interesting.)

 

 

Banks provide cost-effective banking services to 95% of the UK's population

 

In 2005, 24m personal customers registered to access their bank accounts online, while 42 million are registered to access their accounts by telephone

 

Since April 2003, banks have opened a net total of 1.8m Post Office-accessible basic bank accounts

 

Banks in the UK contribute well over £100m per year to charities and local community initiatives

 

Five UK banks are in the top 15 firms listed in the DTI's recent 2006 Value Added Scoreboard of Wealth Creating Companies

 

The value of foreign exchange business passed through London every day is £560bn ($1 trillion)

 

The UK not only enjoys one of the most competitive, efficient and secure banking systems in the world, but is one of the cheapest countries in the world to bank - with 'free if in credit' banking. At the same time, the financial sector's productivity is increasing at a rate of three times to that of the UK economy as a whole and will account for an increasing share of the UK economy and GDP growth, providing the regulatory and tax environment does not deteriorate. The UK continues to be the largest single centre for international banking.

 

so then why do the Banks need secret deals

 

Secret bank rescues to be allowed

 

Mr Darling is launching a 12-week consultation on the proposals

 

Chancellor Alistair Darling has proposed that failing banks should be able to receive help from the Bank of England in secret. He also wants banks to contribute to a fund to repay savers if a bank fails, instead of paying after the event.

But he does not propose increasing the amount of protected savings in bank accounts from the current £35,000.

There will be a 12-week consultation period on the proposals to prevent another Northern Rock-style crisis.

'Non-disclosure'

The proposals suggest allowing banks to receive emergency funding without having to announce it.

There will be a lot of harrumphing in the board rooms of the big banks this morning

 

 

Robert Peston, BBC Business Editor

 

 

Read Robert Peston's blog

 

Under the plans, a "period of non-disclosure" would be allowed so that there is not an "immediate adverse impact on consumer confidence".

The government wants to avoid the situation in which the news that Northern Rock had received emergency funding led to a run on the bank as savers queued to withdraw their money.

"It's unclear whether the devastating run on the Rock could have been prevented by the kind of clandestine help which the Bank may in future be able to provide," said BBC Business Editor Robert Peston.

"The Treasury believes that the Rock probably needed too much money for too long for the Bank of England to be able to keep the rescue operation out of the public domain."

Under the plans, the Bank of England will also no longer have to publish accounts each week setting out how much money it has lent as emergency funding.

Bank of England staff will be immune from prosecution by shareholders who are unhappy about the way it has dealt with a particular bank.

Compensation scheme

The proposals also look at the way that people's savings are protected when a bank fails.

At the moment bank deposits are protected up to a limit of £35,000 per person per bank.

The Treasury proposed keeping the limit at that level but has tried to find ways to speed up the process, such as avoiding the need for victims to make formal claims for compensation.

The Conservative Party has proposed raising the limit to £50,000.

Under the new proposals, the banks that fund the compensation scheme may also have to make pre-payments into it instead of contributing when a bank fails.

However, this could prove problematic for banks given the current financial climate.

"The volatile conditions in financial markets that have created anxiety about the robustness of banks are what make the reform proposal difficult for banks: right now they are chronically strapped for cash," said Mr Peston.

The Conservative's plans do not support the idea of up-front payments from banks.

Tripartite system

The current tripartite system, under which the FSA, the chancellor and the Bank of England work together to deal with emergencies, has been criticised for failing to prevent the first run on a UK bank for more than a century.

But that system will remain largely in place under t

[JOSH_IOU]

I don't think there secret deals.

 

I think there blank cheques.

[Justforfun]

I don't think there secret deals.

 

I think there blank cheques.

 

Just altered my post

 

lol:D

[JOSH_IOU]

:o:D

[Son of Shoestring]

Why this is "NOT" an "EASY" fight. In there own words.

 

 

The British Bankers' Association:

The British Bankers' Association (BBA) is the principal trade association for banks operating in the UK. It is a leading representative body in the financial services sector and has over 200 members, as well as many associate members, which fund its not-for-profit activities. Members of the BBA manage around 90% of UK banking assets.

The UK banking sector contributes significantly to the UK and its economy:

 

 

Banks and financial services provide over 1m jobs

 

Banks and financial services contribute £70bn to the UK's national output (6.8% of GDP)

 

Banks and financial services provide 25% of total corporation tax (£8bn) to the UK Gov

 

The main retail banks provide over 125m accounts, clear 7bn transactions a year and facilitate 2.3bn cash withdrawals per year from its network of over 30,000 free ATM's (Very very interesting.)

 

 

Banks provide cost-effective banking services to 95% of the UK's population

 

In 2005, 24m personal customers registered to access their bank accounts online, while 42 million are registered to access their accounts by telephone

 

Since April 2003, banks have opened a net total of 1.8m Post Office-accessible basic bank accounts

 

Banks in the UK contribute well over £100m per year to charities and local community initiatives

 

Five UK banks are in the top 15 firms listed in the DTI's recent 2006 Value Added Scoreboard of Wealth Creating Companies

 

The value of foreign exchange business passed through London every day is £560bn ($1 trillion)

 

The UK not only enjoys one of the most competitive, efficient and secure banking systems in the world, but is one of the cheapest countries in the world to bank - with 'free if in credit' banking. At the same time, the financial sector's productivity is increasing at a rate of three times to that of the UK economy as a whole and will account for an increasing share of the UK economy and GDP growth, providing the regulatory and tax environment does not deteriorate. The UK continues to be the largest single centre for international banking.

 

Please note the implied threat to the government in the final paragraph: "providing the regulatory and tax environment does not deteriorate."

 

Translation: leave us alone while we rob whoever we please however we please...

 

Regarding the comment: "Banks and financial services provide 25% of total corporation tax (£8bn) to the UK Gov", I would offer the thought that the vast bulk of revenue steaming into government coffers derives from PAYE and other tax burdens imposed on citizens.

 

The difference is that the banking sector, via the BBA, can speak with one coordinated voice, which gives them a disproportionate degree of influence over the rest of us - who speak in a myriad voices. One would have hoped that it is the duty of government to balance these disparities but that is no longer the case.

 

The "Big Bang" followed by excessive deregulation is the cause of these ills. That and the malaise of voracious greed in the body politic.

[photoman]

Assuming it were the case that:

 

 

1. Banks had a straightforward charging structure that made it clear what their charges were and in what circumstances they were payable
   
2. Their terms and conditions complied with the UTTCR (and remember that the UTTCR says: “In so far as it is in plain intelligible language, 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.”)
   
3. They only charged where they actually provided a service (and remember that that would leave no room for any argument that any of their charges were penalties because no charge could be taken to be liquidated damages for breach of contract).
   

On what legal grounds could anyone challenge the level of bank charges?

 

 

Which bank charges currently being made would disappear?

 

 

UTCCR Guidance (issued by OFT in February 2001)

 

5.8 Disguised penalties. Objections under the Regulations to an unfair financial penalty can apply to any term which requires excessive payment in the event of early termination, or for doing anything else that the supplier has an interest in deterring the consumer from doing. The Regulations are concerned with the intention and effects of terms, not just their mechanism. If a term has the effect of an unfair penalty, it will be regarded as such, and not as a ‘core term’. Thus a penalty cannot be made fair by transforming it into provision requiring payment of a fee for exercising a contractual option.

 

 

So in response to your 3 points:

 

IF:

 

1/ Banks had a straightforward charging structure that made it clear what their charges were and in what circumstances they were payable.

Even if this were the case, just by making the terms clear and the structure straightforward, would not make them lawful

 

2/ Their terms and conditions complied with the UTTCR (and remember that the UTTCR says: “In so far as it is in plain intelligible language, 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.”)

Even if presented in plain intelligible language, this alone would not make them lawful. Also, if (which they usually never were) they were included in the original contracts, the fact that they cannot be shown to be an integral "core" term, that the contract could not exist without, is demonstrative of their efforts to disguise or cloak penalty clauses as services

 

3/ They only charged where they actually provided a service (and remember that that would leave no room for any argument that any of their charges were penalties because no charge could be taken to be liquidated damages for breach of contract).

Then they would have no compunction in proving that an actual service, (which meets the criteria and definitions of service; ie. something requested by, agreed upon, and of benefit to the consumer), was actually provided.

They would have also always presented them as such.

Instead, they actually often presented them as relating to a recuperation of costs (liquidated damages) incurred. This is actually how many banks (further confirmed by sake of example Martin Ortons famous letter) frequently and continually presented them.

 

 

PM

[JOSH_IOU]

Please note the implied threat to the government in the final paragraph: "providing the regulatory and tax environment does not deteriorate."

 

Translation: leave us alone while we rob whoever we please however we please...

 

Regarding the comment: "Banks and financial services provide 25% of total corporation tax (£8bn) to the UK Gov", I would offer the thought that the vast bulk of revenue steaming into government coffers derives from PAYE and other tax burdens imposed on citizens.

 

The difference is that the banking sector, via the BBA, can speak with one coordinated voice, which gives them a disproportionate degree of influence over the rest of us - who speak in a myriad voices. One would have hoped that it is the duty of government to balance these disparities but that is no longer the case.

 

The "Big Bang" followed by excessive deregulation is the cause of these ills. That and the malaise of voracious greed in the body politic.

 

Please be aware this is a copy and paste job.

[JOSH_IOU]

Vent all anger at the banks and BBA or and that female.

[Son of Shoestring]

so then why do the Banks need secret deals

 

Secret bank rescues to be allowed

 

Mr Darling is launching a 12-week consultation on the proposals

 

Chancellor Alistair Darling has proposed that failing banks should be able to receive help from the Bank of England in secret. He also wants banks to contribute to a fund to repay savers if a bank fails, instead of paying after the event.

But he does not propose increasing the amount of protected savings in bank accounts from the current £35,000.

There will be a 12-week consultation period on the proposals to prevent another Northern Rock-style crisis.

'Non-disclosure'

The proposals suggest allowing banks to receive emergency funding without having to announce it.

There will be a lot of harrumphing in the board rooms of the big banks this morning

 

 

Robert Peston, BBC Business Editor

 

 

Read Robert Peston's blog

 

Under the plans, a "period of non-disclosure" would be allowed so that there is not an "immediate adverse impact on consumer confidence".

The government wants to avoid the situation in which the news that Northern Rock had received emergency funding led to a run on the bank as savers queued to withdraw their money.

"It's unclear whether the devastating run on the Rock could have been prevented by the kind of clandestine help which the Bank may in future be able to provide," said BBC Business Editor Robert Peston.

"The Treasury believes that the Rock probably needed too much money for too long for the Bank of England to be able to keep the rescue operation out of the public domain."

Under the plans, the Bank of England will also no longer have to publish accounts each week setting out how much money it has lent as emergency funding.

Bank of England staff will be immune from prosecution by shareholders who are unhappy about the way it has dealt with a particular bank.

Compensation scheme

The proposals also look at the way that people's savings are protected when a bank fails.

At the moment bank deposits are protected up to a limit of £35,000 per person per bank.

The Treasury proposed keeping the limit at that level but has tried to find ways to speed up the process, such as avoiding the need for victims to make formal claims for compensation.

The Conservative Party has proposed raising the limit to £50,000.

Under the new proposals, the banks that fund the compensation scheme may also have to make pre-payments into it instead of contributing when a bank fails.

However, this could prove problematic for banks given the current financial climate.

"The volatile conditions in financial markets that have created anxiety about the robustness of banks are what make the reform proposal difficult for banks: right now they are chronically strapped for cash," said Mr Peston.

The Conservative's plans do not support the idea of up-front payments from banks.

Tripartite system

The current tripartite system, under which the FSA, the chancellor and the Bank of England work together to deal with emergencies, has been criticised for failing to prevent the first run on a UK bank for more than a century.

But that system will remain largely in place under t

 

HHmmm. Let me see... it's okay for taxpayer to bail out banks to the tune of £60 billion and counting for Northern Rock alone (the same amount as the annual heath service budget for 2002/3 - give or take a couple of billion) but those same taxpayers, now renamed as depositors do not get their deposits protected beyond £35k.

 

Nice to see fairness in action...

[nicsussex]

(the same amount as the annual heath service budget for 2002/3 - give or take a couple of billion)

 

We spent that amount on servicing the UKs Heathland - I demand an enquiry!

[dave]

...and yet, we're told that 'they' need to raise an extra 85 billion in taxes this year to 'make the books balance'.

 

Well, the easy answer would be to let private enterprise make it's own bloody mistakes and suffer it's own consequences.

[ginan]

I confess that I hadn't heard of Brian Doctor before, but then I'm not that au fait with most QCs but looking at his cv I'm pretty impressed. Can you elaborate as to why you think someone else should/could do it?

 

I'm not sure that I said that someone else should do it but since your asking,

you only need 3 minutes to watch him in action to reach that conclusion.

[jansus]

Also there really has never been a case like this before has there? And I would have thought that logic would dictate that the banks could afford a more "expensive " QC - after all it is our money they are using:rolleyes:

 

But to be fair it is the expertise that is important so lets see how he does after his shaky start.

 

By the way do you think the gov will extend "secret rescue deals" to all the home owners who are expected to face re-possesions of their properties this year? If the banks can escape from punishment for mishandling our money - should we not be exempt for our bad handling of theirs?

[JOSH_IOU]

Some ATMs charge a fee of £1.00-£1.75 per transaction (more in some cases), fixed regardless of the amount withdrawn. Although surcharging ATMs constituted an utilisation rate of only about 3% of all ATM transactions, consumers still paid £60m per year in ATM charges in 2003.7 A single consumer, forced to use a surcharging ATM costing £1.50 to withdraw £20 four times a week would be paying £312 per year in ATM charges alone.

[JOSH_IOU]

The European Commission decided to fine five German banks a total of 100,8 million euro for allegedly fixing the charges for the exchange of euro-zone currencies.

 

The Commission stated it fined the banks because in a "clear violation of European antitrust rules", the German banks in 1997 entered into a "cartel" which "represents a very serious infringement of the EC competition rules and justifies heavy fines". The banks apparently charged "no less than" 3% for the exchange of euro-zone banknotes to compensate for the abolition of the buying and selling 'spread' at the dawn of 1999 when the euro was launched.

[Son of Shoestring]

...and yet, we're told that 'they' need to raise an extra 85 billion in taxes this year to 'make the books balance'.

 

Well, the easy answer would be to let private enterprise make it's own bloody mistakes and suffer it's own consequences.

 

The business model demanded by the free enterprise, non-regulation boys only extends to making vast hoards of money. When things get tough, they demand government assistance.

 

Curiously, government ministers are always willing to help their future employers out with favours.

 

Dear old Tone Bliar now works for the powerful American bank JP Morgan. The hardship of working for them two days a week is compensated by the two million a year they pay him. The rest of the week he spends between polishing his teeth, fixing his smile and coining in another half a mil. working for Swiss Re -- another powerful financial outfit.

[rob7b]

so in a nutshell what is the latest news on this thing? i have two claims and the banks say they are waiting on the result of the test case...

[Guest Macedonian]

The hearing will end next week, but the judgement is not expected for 2 or 3 months. In other words, whetever the judge decides will not be known until then. There were early indications that if the judge found for the OFT he would insist that the courts resumed processing claims, but this is not clear.

 

The general advice is that if you can you should file anyway, and then your claims are lodged in the system. The only problem with this is that they will still take court fees and do nothing, so that money will be tied up for an indefinite period. Your call really.