FSA position on account closures and default charges

[BankFodder]

A&L is not the only bank to close accounts as a retaliation for challenging their charges. It's not new.

 

Banks will do this using the discretion which they retain under the banking contract to close your account at any time.

 

Where an account has been conducted badly to a point where it can said that that it causes the bank so many problems that the purpose of the contract has been significantly disrupted or even destroyed by the cusotmer's behaviour then it might reasonably be said that the closure of the account is a reasonable step.

 

Where the closure of the account is triggered as a repsonse to a challenge to the banks charges and those charges are unlawful then it would be reasonable to argue that the bank's use of its discretion is abusive.

 

Of course where there has been a pattern of account "misconduct" as well as a challenge to the bank's charges, it will be difficult to disentangle the two. The bank quite naturally will want to say that the account closure is not retaliatory but is justified by the other behaviour of the customer.

**********************************************************

 

If your account is closed by the bank and there is either no overdraft or you are able to repay any outstandings within a very short time then there should be no impact on your credit record.

 

However, where there is an amount owing and the sum cannot be repaid within a certain agreed timescale then the bank will very likely enter a default and this will have consequences for at least a 6 year period.

**********************************************************

 

What can you do about retaliatory account closure?

 

If you feel that you are able to demonstrate convincingly that the account closure was triggered in response to your challenge to the bank's unlawful charges then you could consider asking the court for an injunction to prevent the closure.

 

You can do this either on its own or at the same time as making a County Court claim for the return of your money.

 

You should probably only try this if:-

• your acccount has generally been well conducted.

• Your account has previously been poorly conducted but has shown a clear pattern of improvement within the last 3-6 months up to the present day

• You can show that it is the application of unlawful charges which has given the impression that your account has not been correctly conducted.

You should probably only apply for an injunction if the account has not yet been closed.

 

Whatever you decide to do, you should write a letter of complaint to the OFT. Complain that the bank's application of its discretion as a retaliatory measure in repsonse to charges which the OFT itself has said are unfair under UTCCR is itself unfair under those regulations.

 

Retaliatory closure of bank accounts mock the OFT and its report.

 

There is no particular reason why an application for an injunction in these circumstances should not be a matter for the Small Claims Track. However, at the end of the day it will be a matter for the judge who is managing the case.

The issues are broadly the same as those for the recovery of your money. For this reason, the bank will be faced with the same risk of losing and/or of having to reveal the true information about its charging regime.

 

However, at the end of the day, it is your case and your call - as it is with your claim to recover your money.

 

Do not decide to apply for an injunction without fully understanding the significance of what you are doing. You could end up in court and of course, you could lose your case.

This is exactly the same consideration as a claim to recover your money

[BankFodder]

We are in that the process of producing a new FAQ to inform people about injunctions and interim injunctions in relation to the problem of retaliatory account closure.

We hope also to prepare some templates for those who wish to prevent the closure of their accounts.

We are quite sure that the obtaining of an injunction in these circumstances especially in the case of Alliance and Leicester customers and also Nationwide will be fairly straightforward.

The recent announcements by these banks that they will respond to claims by closing accounts is extremely helpful to us.

[BankFodder]

I suggest that anyone protesting against account closure should enclose a copy of this to their bank with any other material.

I suggest that it is sent on a separate attached page and that the bank's attention is specifically drawn to it.

 

Briefing Note BN 023/06

4 July 2006

 

FSA position on account closures and default charges

 

Generally, under FSA rules on dispute resolution and complaints, we would not expect any regulated firm to discriminate against a customer who makes a complaint.

 

However the relationship between a bank and its account holders, including the circumstances and manner in which accounts are closed, is governed by the Banking Code.

 

We have therefore raised this issue with the Banking Code Standards Board, and informed those firms involved that we have done so. As a result of those conversations, we understand that the Banking Code Standards Board intends to state its position on this issue presently. We encourage the industry to use this opportunity to demonstrate the value of the Code in ensuring fair and reasonable outcomes to such disputes.

[tedblue]

Is there a link to where this has come from, so as to be able to print it from the original text?

[srfrench]

Not sure if this helps anyone, but I trawled through the FSA website and picked up this link related to this post.

 

Could be relevant......... take your pick, have a read and sorry in advance if it's not.

 

FSA sets deadline for firms falling behind with 'treating customers fairly'

[srfrench]

Ooo ooo, just come across another juicy one. Read/click the link for the FSA website and especially read the last section. Then read the previous post (by me) and then this one in full.

 

If your confidence doesn't soar I'll be surprised! :o

 

Towards fair outcomes for consumers

 

Would need BankFodders opinion on this one, when back from Hols obviously! 8¬)

[jeremy1]

Hi All,

 

Hope I havent mucked up the thread, as I'm new to this...I put in a Injunction Application against the closure of my account on 27/07/2006, will keepyou guys posted on developments..

 

Any advise would be welcome

 

Cheers

 

J

[dave]

Is there any news on your application?

[BankFodder]

If you have applied for an injunction in respect of an account which has already been closed then I would rate your chances of success as nil.

 

Injunctions must almost always be sought in order to pre-empt an action.

 

However, I would like very much to know more about how you made the application, which form, what wording etc and how much.

A scan of the application would be very helpful

[BankFodder]

Ooo ooo, just come across another juicy one. Read/click the link for the FSA website and especially read the last section. Then read the previous post (by me) and then this one in full.

 

If your confidence doesn't soar I'll be surprised! :o

 

Towards fair outcomes for consumers

 

Would need BankFodders opinion on this one, when back from Hols obviously! 8¬)

I have scanned through some of it. It is obviously good stuff but it is open enough for the banks still to say that they are treating customers fairly and reasonably and that their charges are transparent - in other words no change.

 

Of course the FSA says that they may take action against firms which do not implement correctly but this of course will be preceeded by years of complicated negotiations - all in secret, of course leading to the equivalent of the OFT report - excellent in principle, but sufficiently ambiguous as to lead to no serious change and no apparent will by the publishing body to bare its fangs.

 

I am very much afraid that the campaign of a thousand cuts has to go on.

 

I'm not about to go through the whole thing closely, I'm afraid.

Can you quote me the particular part which you think is of interest.

[HSBCrusher]

• You can show that it is the application of unlawful charges which has given the impression that your account has not been correctly conducted.

 

If the amount claimed amounts to more than the overdraft limit, could it be argued that the account would have operated quite normally and within the agreement if those unfair charges not been applied?

[JonCris]

I would think so & it's also a very strong argument for having adverse removed from your CR file.

[david.m]

perhaps this 27th july 2006 banking code bulletin could have some use from our end user perspective?.

http://www.bankingcode.org.uk/bulletins/Bulletin%2021%2027%20Jul%2006%20PDF%20FINAL.pdf

 

notice how they refer to "some website based groups" LOL.

 

i also mentioned it on the Default hell!! thread

were dayglo made copy of it incase it got removed and makes it easyer to follow etc, perhaps someone can hand type it at some point so we can cut and past (page2 and 3)sections if its deemed useful ?.

http://www.consumeractiongroup.co.uk/forum/legalities/20118-default-hell-11.html#post202392

[JonCris]

Yeah! another chocolate teapot "self regulator" run by the banks for the banks.

 

Why didn't THEY investigate their members & advise THEM their penalty charges are illegal.

 

Loved the bit about "cos the OFT are calling them "penalty" charges so will we"

 

What else are they going to call them "fair & reasonable" I suppose

[fivelaws]

I received my account closure letter yesterday from the A&L stating that the account is being closed on 26-Sep because I disagree with "certain" of the T&Cs.

 

Whilst I would almost be glad to see the back of them, there is a principle at stake here and I intend to defend this as far as practically possible.

 

In the abscence of an FAQ, I am intending to file an N1 at the County Court tomorrow with the following wording as to the particulars of claim; (with big props to Paul Wilton's wording in the Stays thread)

 

Further to an application to the court for judgment on unlawful charges levied from an account held with the defendants organisation (claim AFnnnnn dated dd-mm-yy), settlement has been reached and full repayment of charges received without acceptance of liability.

 

On the 21-Aug-2006, the defendant notified in writing that as the unlawful elements of their terms and conditions were unacceptable, they were closing the account with effect from 26-Sep-2006 and accordingly were withdrawing the credit facility on the account from the same date.

 

The defendants decision to close the account is clearly a punitive punishment in direct response to the complaint and subsequent application to the court and appears to contradict the banking code of practice, the Financial Services Authority judgments and the common law.

 

I respectfully request that the court issues the following injunctions:

 

• That the defendant is prevented from closing my account.

• That the defendant is prevented from withdrawing the existing credit facility.

• That the defendant is prevented from applying further penalty charges to the account.

• That the defendant is prevented from making any entry on its own systems or from communicating any similar information to any third party about any matter insofar as it relates to either the penalty charges or account closure.

• That the defendant remove any derogatory entry on its own records insofar as it relates to either penalty charges or account closure.

• That should my claim proceed to a hearing that a decision should be made at the hearing as to whether these injunctions should be made permanent.

• That if the matter should not proceed to a hearing because the defendant decides to settle outside court, that these injunctions should become permanent.

 

Thank you for taking the time to consider the above requests and I look forward to hearing from the Court in due course.

 

 

 

I understand that this falls under the "claim is for something other than money", so the court fees are £150. Anybody got any experience of this?

[HSBCrusher]

might have trouble with the third one? (preventing charges)

It's not the charge itself thats unlawful, it's the level of them.

"Please bank, never charge me again." Don't think it would stick.

Whatcha think?

Rest of it I like.

[david.m]

thank you for taking this up, im sure that many people here are behind you in this step to perhaps make the A&L and indeed the other banks etc take notice of our needs and also perhaps their own banking code.

[fivelaws]

might have trouble with the third one?

 

To be honest, I'm less and less sure about nearly all of them. In fact, the more I look at them, the more I'm thinking K.I.S.S. (keep it simple, stupid) and dropping the whole lot apart from #1.

 

?

[HSBCrusher]

K.I.S.S. (keep it simple, stupid)

 

?

 

I will have to remember that one!

[JonCris]

I received my account closure letter yesterday from the A&L stating that the account is being closed on 26-Sep because I disagree with "certain" of the T&Cs.

 

Whilst I would almost be glad to see the back of them, there is a principle at stake here and I intend to defend this as far as practically possible.

 

In the abscence of an FAQ, I am intending to file an N1 at the County Court tomorrow with the following wording as to the particulars of claim; (with big props to Paul Wilton's wording in the Stays thread)

 

Further to an application to the court for judgment on unlawful charges levied from an account held with the defendants organisation (claim AFnnnnn dated dd-mm-yy), settlement has been reached and full repayment of charges received without acceptance of liability.

 

On the 21-Aug-2006, the defendant notified in writing that as the unlawful elements of their terms and conditions were unacceptable, they were closing the account with effect from 26-Sep-2006 and accordingly were withdrawing the credit facility on the account from the same date.

 

The defendants decision to close the account is clearly a punitive punishment in direct response to the complaint and subsequent application to the court and appears to contradict the banking code of practice, the Financial Services Authority judgments and the common law.

 

I respectfully request that the court issues the following injunctions:

 

• That the defendant is prevented from closing my account.

• That the defendant is prevented from withdrawing the existing credit facility.

• That the defendant is prevented from applying further penalty charges to the account.

• That the defendant is prevented from making any entry on its own systems or from communicating any similar information to any third party about any matter insofar as it relates to either the penalty charges or account closure.

• That the defendant remove any derogatory entry on its own records insofar as it relates to either penalty charges or account closure.

• That should my claim proceed to a hearing that a decision should be made at the hearing as to whether these injunctions should be made permanent.

• That if the matter should not proceed to a hearing because the defendant decides to settle outside court, that these injunctions should become permanent.

 

Thank you for taking the time to consider the above requests and I look forward to hearing from the Court in due course.

 

 

 

I understand that this falls under the "claim is for something other than money", so the court fees are £150. Anybody got any experience of this?

 

You need to show that the closing of your account WILL cause you problems & even hardship. Not being able to pay bills. DD will be missed Payment odf salary etc: causing further problems. Also when the bank pass the information on that you are disputing their charges you will find it impossible to open another siutable bank account. Furthermore you believe the bank are obviously closing your account in order that they can terminate any agreement before resinding your borrowing on demand which they are aware you can't meet in full.

 

You also believe that the banks unlawful conduct will affect your Human Rights in that you will be unable to have a fair trial (At this point don't start quoting the HRA verbitum)

[PhantomReclaimer]

might have trouble with the third one? (preventing charges)

It's not the charge itself thats unlawful, it's the level of them.

 

The charges themselves are unlawful. It is unlawful to include a penalty clause in a contract and the UFCTA 1977 says that a person acting as a comsumer cannot be made to indemnify another.

 

P.

[HSBCrusher]

The charges themselves are unlawful. It is unlawful to include a penalty clause in a contract and the UFCTA 1977 says that a person acting as a comsumer cannot be made to indemnify another.

 

P.

If you cost them extra, for instance they have to write a letter, there is a very small cost would be quite acceptable if it was not blown up out of all proportion. It might be 30p including postage? We don't know for sure.

To cover costs is entirely lawfull, blowing them out of all proportion to make large profits to the detriment of those least able to afford them..... that's unlawfull.

 

"A fair default charge should not exceed a reasonable estimate of certain limited administrative costs which the credit card issuer reasonably expects to incur as a result of default"

 

of course this is the oft ruling on cards, but the same principle applies to any account...

 

http://www.consumeractiongroup.co.uk/forum/faqs-please-read-these/1-frequently-asked-questions.html

[PhantomReclaimer]

To cover costs is entirely lawfull, blowing them out of all proportion to make large profits to the detriment of those least able to afford them..... that's unlawfull.

 

"A fair default charge should not exceed a reasonable estimate of certain limited administrative costs which the credit card issuer reasonably expects to incur as a result of default"

 

of course this is the oft ruling on cards, but the same principle applies to any account...

 

http://www.consumeractiongroup.co.uk/forum/faqs-please-read-these/1-frequently-asked-questions.html

 

The charge dosen't become lawful simply because they are coverng their costs. That quote from the OFT related to the charge being "fair". Fair and lawful are not necessarily the same.

 

Sure, a charge that only covered genuine costs may not be seen as a penalty by a Court but that is not guaranteed. Also, the UFCTA 1977 says that a clause in a contract that requires a person dealing as a consumer to indemnify another against negligence is void. Such a clause may be enforcable but is subject to a test of reasonableness but it's the clause that the test is applied to, not the actual charge it' self and it's for the person seeking to rely on the clause who has to show that it's reasonable. At present, I don't think that the banks can do that because if they could they already would have done.

 

P.

[Glenn UK]

i think a point worth making is that the banks are relying on the T&C to enforce the imposition of penalty chagres.

 

As i read them, most T&Cs dont claim to provide you with a service when you go overdrawn. As far as i can make out they impose a standard charge for dealing with these issues.

 

If they wish to recover their costs then it has to be within the T&C up front i believe.

 

In other words if the T&C says we will charge for the administration of your account on the basis of a cost per letter or an annual admin fee, this is entirely different to the reasoning banks and cc companies are applying to their charges now.

 

In other words regardless of what the acutal costs are they are imposed in the form of a penlaty and not as a genuine service charges. it is the way they are applied that is unlawful and even if the cost was applied as fractions of a penny that wouldnt change ie that its unlawful to try to make a consumer indemnify someone else by way of a contract T&C with a company.

 

If its applied on the basis of a service charge and not as a penalty, then the charge has to reflect a reasonable charge on the basis of, urm, minds gone blank and cant remember which bit of legislation it is now, but im sure you get the drift.

 

At least thats how i see it.

 

Be happy to be shot down in flames if i have misunderstood the situation.

 

Glenn

[whataboutyeah]

If your account is closed by the bank and there is either no overdraft or you are able to repay any outstandings within a very short time then there should be no impact on your credit record.

 

However, where there is an amount owing and the sum cannot be repaid within a certain agreed timescale then the bank will very likely enter a default and this will have consequences for at least a 6 year period.

**********************************************************

 

I think that I could pay all overdraft/outstandings on my account, but not my loan. Would I be right in thinking that the loan would not be subject to this repayment? As my loan repayments/repayment period has already been agreed? If so, I am thinking of closing my account before I claim, and just leave the loan.