H.O.L Test case appeal. Judgement Declared. ***See Announcements***

[middenmess]

How can the Bank's be allowed to put this sort of statement out to confuse and mis-inform the public.

 

The Supreme court make a decision and the bank's extract a few words from it and publish their interpretation and imply that their spin on it is now a set in stone Law.

 

How can we expose their deceit to all?

[adamski]

It reminds me of Citicard when a CAG member lost in court against them they sent out letters saying we won so discontinue your claim,...... in the end they paid out!

[kennyh]

As a prep for the coming battle and, unlike OFT, in an effort to tie up the small details can someone please confirm what are the 'core terms' of T&Cs - I'm assuming (and I will not be doing much of that) that there are no banner headlines to indicate them that I've missed.

[Bigredbus]

Copy of the letter sent by the FOS to Current Accounts providers dealing with hardship cases (dated October 2009) can be found here:

http://www.financial-ombudsman.org.uk/faq/pdf/hardship-letter-A.pdf

[Bigredbus]

Analysis of the Supreme Court judgment with suggestions on where the case could go by the Principal Solicitor at the Govan Law Centre in Glasgow.

 

 

A narrow victory for the banks … but the door remains open for challenge

 

The OFT's case fell on Reg 6(2) of the UTCCR because the Supreme Court held that bank charges were truly a core term of customers’ banking contracts; an essential part of the ‘price’ for banking services. Yet, the Supreme Court carefully acknowledged that their decision did not ‘end the matter’ (para 61, Lord Phillips' speech).

 

Lord Phillips identified a critical point of far-reaching significance. If regulation 6(2) engages then you cannot assess the fairness of that contractual term (bank charges) in relation to the adequacy of cost; this is the 'excluded assessment' construction adopted by Mr Justice Smith (at para 422) and this construction was not challenged before the Court of Appeal or the Supreme Court.

 

Contrast this against the alternative construction which says that if regulation 6(2) engages to a contractual term (e.g. for bank charges) then there can be no assessment of fairness in any circumstance under the UTCCR; this is known as the 'excluded term' construction.

 

This distinction in statutory construction is of fundamental and far-reaching importance. The Supreme Court explicitly stated that given the court’s and parties’ acceptance of the 'excluded assessment' construction, it followed that the regulation 5(1) test of fairness was a standalone test. Regulation 5(1) was not concerned with adequacy of price, instead it was concerned with 'a significant imbalance in the parties rights and obligations under the contract to the detriment of the consumer'.

Thus, the Supreme Court identified (and almost positively encouraged) a fresh challenge to the fairness of bank charges under the UTCCR by establishing a standalone regulation 5 case. This door is open not only to individual consumers, and the OFT, but arguable the FSA.[1]

 

What might a regulation 5 case look like?

 

There is ample evidence in the public domain that banks have acted in bad faith over their explanations to customers about the reason and purpose of bank charges.

 

When the UK banks gave evidence to the House of Commons Treasury Committee on how bank charges were calculated they said: "[bank charges] are going to pay for all the people we have who pursue debt, collect debt, speak to customers and chase payments. The way these charges are arrived at is by taking these total costs and making some assumptions about the volume that is going to come through to arrive at the individual charges" (House of Commons, 2nd report, 25 January 2005, paragraph 50: http://www.parliament.the-stationery-office.co.uk/pa/cm200405/cmselect/cmtreasy/274/27405.htm).

 

This explanation is entirely different to what the banks told the court in the OFT's test case. As Lord Walker summarises in his judgement in the Supreme Court’s decision, the 12 million UK customers who pay bank charges generate 30% of the banks' total revenue stream from current account customers and cross-subsidise 'free if in credit banking' to 42 million other UK customers who never (or very rarely) incur charges. To put it simply, one customer in the UK will pay for four other customers' retail banking service; and in Govan Law Centre experience, the customer who has to pay these charges can ill-afford them.

 

If we go back to 2006 the banks said (via the BBA publicly, or directly in correspondence to customers) that bank charges reflected the 'actual costs' to the bank of a customer going overdrawn without permission. This explanation was further refined by the banks as the 'manual intervention' justification, whereby one had to factor in the 'staff time’ involved in looking over a customers' personal account when they incurred unauthorised transaction charges.

 

By 2007, many banks had began to re-draft their standard terms and conditions of contract to remove references to 'default charges', and introduce a new explanation and justification for bank charges. Customers were told charges were 'fees' for the bank considering an informal application for an overdraft, which could either be declined or approved. But either way, the bank would impose a fee for this service. Ultimately, if it had not been for the OFT's test case, the public would have never learned the truth about what bank charges paid for.

 

If we turn now to the question of whether bank charges cause 'a significant imbalance in the parties rights and obligations under the contract to the detriment of the consumer' it is evident that the standard terms of UK banking contracts compel a minority of customers to subsidise the current account costs of the majority of customers.

 

This has never been explained to those customers – either at the point of opening an account, after the account has been opened, or when fees are increased. Indeed as already noted, the banks have been highly evasive on the true purpose of charges. It seems obvious to suggest that a contractual charging structure which results in 12 million customers cross-subsidising 42 million other customers, must place subsiding customers at a significant disadvantage contractually. It would clearly be a matter for the court to decide whether this contractual obligation to subsidise was truly a significant imbalance to the detriment of the consumer.

 

However, we could certainly provide considerable evidence from case files (which could include a whole host of advice agencies and consumer organizations up and down the country) to show how this contractual position resulted in extremely serious consumer detriment.

 

To give but a few examples of the effect that a cross-subsiding bank charging structure in contracts has on customers:

 

• Consumers are trapped within a cycle of debt, whereby once charges are applied to a customer’s account this results in an ongoing monthly deficit, resulting in ongoing monthly charges and interest, with the process locking the consumer into a financial position which they cannot easily escape from;
  
• We could provide evidence to show that the charging structure was most commonly applied to vulnerable consumers – whether through reason of illness, relationship breakdown, social care problems, unemployment, loss of overtime, redundancy, temporary drop in household income, consumers affected by the recession, or credit crunch – and that charges exacerbated/directly led to either mental health problems and/or financial difficulties for vulnerable consumers;
  
• We could provide evidence which showed that the charging structure placed consumers at risk of mortgage repossession or eviction, by reducing their ability to meet payments to their mortgage or rent; and
  
• That the charging structure resulted in some consumers being without any money for temporary periods, resulting in short periods of absolute destitution, and the inability to provide for staples such as food and heat.
  

 

Govan Law Centre

26 November 2009

 

[1] Upon the basis that as bank charges are now a core term of every banking contract - that is part of the overall price for the retail banking service – they are no longer a separate ancillary ‘credit issue’ under the Consumer Credit Act 1974 as amended. This means bank charges must fall under the FSA retail banking jurisdiction (which commenced 1 November 2009) and BCOBS et al would therefore apply.

 

***Notice: I am not Mike Dailly***

Edited November 27, 2009 by Bigredbus
Addendum

[barry_2008]

Dear Denis Murphy,

 

I am writing to you in you're capacity as Minister of Parliament regarding the unfair inhuman degrading bank service charges regime.

When applied as an implied breach of contract.

 

I and many others agree that if a settlement in the current test case is reached and the banks are allowed to charge for an overdraft, this would be a fundamental breach of our Human Rights.

 

This would eventually take power away from the consumer and this would not be the policy of the Labour Party.

 

The supremacy of law, means that the law is above everyone and it applies to everyone. Whether governor or governed, rulers or ruled, no one is above the law, no one is exempted from the law, and no one can grant exemption to the application of the law. If this is not taken into account your constituents including myself may suffer financial hardship and further Mental Health issues.

 

Article 3 of the European Convention on Human Rights prohibits torture, and "inhuman or degrading treatment or punishment". There are no exceptions or limitations on this right.

The Court have emphasised the fundamental nature of Article 3 in holding that the prohibition is made in "absolute terms ...

irrespective of a victim's conduct."

 

I write asking you're support in this situation and my fight against these charges and look forward to a prompt and full response.

 

Yours sincerely,

Barry_2008

[barry_2008]

Response

 

Dear Barry_2008,

 

Denis Murphy MP has asked me to thank you for your email and confirm that he has raised your concerns directly with the Chancellor of the Exchequer. Denis will contact you again upon receipt of a response.

 

Yours sincerely

[noomill060]

Good one!

 

(Actually, there is one person who is above the law.)

[barry_2008]

who's that noom ? Are ya gona say ya self?

[noomill060]

The Queen.

 

And no, Im not the Queen.

[barry_2008]

The Queen can still be trialled for treason so no she ain't.

[Bigredbus]

E-mailed the Chancellor of the Exchequer...

[noomill060]

Emailed The Queen

 

(Now you're for it, Barry!)

[InformedSearcher]

Response

 

Dear Barry_2008,

 

Denis Murphy MP has asked me to thank you for your email and confirm that he has raised your concerns directly with the Chancellor of the Exchequer. Denis will contact you again upon receipt of a response.

 

Yours sincerely

 

 

Have you emailed MI5 about this? Or is it MI6? Whoever is responsible avoiding opressors to take over and rule? Woah, the banks already rule the country if I see it correctly? This now reminds me of all those smug banker faces when they get the HoC committee interviews on TV.

 

Michael

[InformedSearcher]

Decision 25 November 2009

 

The Supreme Court has ruled that the level of the bank's current unarranged overdraft fees are not assessable for fairness under the Unfair Terms in Consumer Contracts Regulations (UTCCR).

The ruling means the Office of Fair Trading (OFT) is not able to continue to investigate the level of unarranged overdraft charges as part of their investigation into the fairness of those fees.

first direct and the other banks involved in the court case will continue to work with the Financial Services Authority (FSA) and the OFT to determine the next steps in resolving this issue. Our website will be updated once the next steps are agreed.

Complaints relating to unarranged overdraft fees will remain on hold under the terms of the FSA waiver (see below) and the banks will continue to apply normal processes to any new complaints.

Q: What does this decision by the Supreme Court mean?

A: Legally, it means that level of unarranged overdraft charges is not assessable for fairness and, therefore, that the OFT is not entitled to assess the cost of unarranged overdraft fees for fairness.

Q: Does this mean the banks won't be refunding charges?

A: We are working with the OFT and other banks on the implications of the decision. In the meantime claims for overdraft refunds remain on hold and we will get back in touch with all customers as soon as the next steps are agreed.

Q: What happens now?

A: The next steps are to be agreed with the OFT and the FSA. Claims for unarranged overdraft fee refunds remain on hold.

Q: When will the case be concluded?

A: The banks will work with the OFT and FSA to agree next steps to conclude matters.

 

This is from First Direct website

 

 

Hang on this is 'First Direct'!! Many of us here do not get all UK dealings with banks as FD customers do. There are different rules for those of us who have 3rd world country 'customer (dis)service' offerings! LOL

 

Don't you just love it - 'The banks will work with the OFT and FSA to agree next steps to conclude matters'. Erm, they've all been working together these last 2 plus years!

 

Michael

[Bigredbus]

This is an extract of the letter sent by the FSA to the Independant Banking Code Review at the British Banker's Association in February 2007...

 

Principle 6 is of particular relevance to the BC (Banking Code) Review. This states that ' a firm ('Bank') must pay due regard to the interests of its customers and treat them fairly'. This is the basis of our 'Treating Customers Fairly' (TCF) initiative.

 

The letter can be read here:

 

http://www.fsa.gov.uk/pubs/other/banking_review07.pdf

Although The Banking Code was withdrawn on 01 November 2009, no longer being in force, the BCOBS (Banking Conduct of Business Sourcebook and Payment Services Regulations 2009 ) has replaced it...

COBS 2.1 - Acting honestly, fairly and professionally.

- The client's best interests rule.

2.1.1 (1) a firm must act honestly, fairly and professionally in accordance with the best interests of its client (the clients' best interest rule). See: FSA Handbook - Full Handbook

 

Edited November 27, 2009 by Bigredbus

[the_shadow]

Removed..

Edited November 27, 2009 by the_shadow

[alanfromderby]

Just had this forwarded to my facebook page...

 

Its from Martin Lewis

 

 

S.

 

 

This is correct, and is what I was eluding to earlier in the thread. From the moment the judgement was announced we have been working with Martin, and several other key campaigners and legal advisers to ensure that we are all able to have the best possible advice on the way forward.

[the_shadow]

This is correct, and is what I was eluding to earlier in the thread. From the moment the judgement was announced we have been working with Martin, and several other key campaigners and legal advisers to ensure that we are all able to have the best possible advice on the way forward.

 

Sorry Alan if I've jumped the gun, have edited the post just in case.

 

S.

[alanfromderby]

Sorry Alan if I've jumped the gun, have edited the post just in case.

 

S.

 

No that's fine - this is the release:

 

NEWS RELEASE

Friday 27 November 2009

 

News Update: Ray Cox QC to fight bank charges

 

MoneySavingExpert.com has today arranged for top banking barrister Ray CoxQC to redraft its bank charges template letters, in light of the Supreme Court judgem ent.

 

The site is doing this by engaging Govan Law centre, run by campaigning solicitor Mike Dailly, and it will instruct Mr. Ray Cox QC and Mr Giles Wheeler, both barristers at Fountain Courts Chamber, Temple.

 

Martin Lewis, creator of MoneySavingExpert.com says:

 

"There are millions of people with cases on hold, and the OFT won’t be giving its view until December – meanwhile the banks are already starting to apply to have cases kicked out of court. We hope to put the brakes on this by drafting amended documents which people reclaiming can submit to the court based on the latest ruling.

 

"The Supreme Court itself noted that the question of fairness could still be looked at under the now infamous ‘regulation 5’ of the UTCCR regulations and that's exactly where we will be attacking. It will be interesting to see how the banks react to what we hope will be the Rolls-Royce of template letters – drafted by a QC who has many times lead cases for the banks themselves.

 

"We may even return to a situation of goodwill payments in the interim as they wait to expand their arguments, so as not to risk a precedent setting decision against them.

 

"While we’re under no illusions of the difficulty of the task, and don’t want any reclaimers to bank on getting their money back, this does mean the campaign's back on and the banks need to watch in their rear view mirrors."

 

Solicitor Mike Dailly of Govan law centre comments:

 

“We're delighted to be working with MoneySavingExpert.com on what is perhaps one of the biggest rescue operations in recent UK consumer history.

 

"Rumours of the demise of the unfair bank charges campaign have been greatly exaggerated by the banks. The Supreme Court gave a very clear message that bank charges could still be unfair under regulation 5, and so a brand new right to reclaim will shortly be available to consumers on the authority of no less than the Supreme Court itself".

 

The template letters and legal advice should be available within the next two weeks on MSE alongside the other free campaigning sites including the Consumer Action Group and Penalty Charges - who will be feeding into this process too.

[steven4064]

"we are not saying charges are fair, but we care saying you cant use this clause to prove it. Use this one instead.

I dont thank this is tongue in cheek, I think it is a pretty fair summary of the position.

[paulwlton]

Excellent !:):)

 

 

http://www.fountaincourt.co.uk/raymond-cox-qc/

[Aequitas]

Looks like

 

Regulation 5

 

is going to be the new mantra that people will chant against the evil eye.

 

My head is spinning. It seems that the test case was not about what the test case was about after all, but about something quite different on which the banks lost badly. Over the weekend I think I shall read the case report again. I hope to find some real encouragement in it, rather than straws to grasp at, but I fear I shall not.

[InformedSearcher]

I think many should be aware that it won't be long before the 'damage limitation' letters start rolling out of the banks. The main thing is to hold firm and not be directed by well versed (probably trained for weeks) bank employees telling you what they want you hear and do.

 

To me if the banks think they got away with it then they should be reminded otherwise. This is a big problem of banks once being respected and believed to what we have now, apparantly the exact opposite with professionals drawn in for the 'spin'.

 

Michael

[barry_2008]

Regulation 5 because 8 says so ye?