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

[Bigredbus]

Check the following link... Santander launching new current account with no fees, no penalties (for mortgage holders though!)

 

Santander launches new current account that does not charge for going overdrawn | Mail Online

 

Is that the start of a revolution?

[Bigredbus]

Could one of the mods draft an e-mail for the PM?

 

'L'union fait la force'

[Bigredbus]

Low income consumers are often unable to oppose disproportionate charges on their bank accounts. Regulators should step in to protect them from being punished by their banks. Are they?

[Bigredbus]

Here's what the 'Solicitors Journal' has to say about this morning ruling:

 

Crash, bank, wallop

Banks aren't exactly popular right now. They have become even less so after this morning's Supreme Court ruling on unauthorised overdraft charges.

It all started when the OFT decided to look into the fairness of these charges under the regulations implementing the EU's directive on unfair terms in consumer contracts.

Unfortunately, the consumer watchdog chose the wrong angle for its investigation: the banks objected that it could not, under regulation 6, question the 'value for money' aspect of the charges.

This minor steering error on the OFT's part eventually sent it crashing out of the race, as the Supreme Court, in its sixth ruling since it was set up in October, has upheld the banks' contention.

It was an awkward case from the beginning, questioning whether the OFT could challenge the banks at all. Predictably perhaps, the outcome is a disappointing win on a technical point.

But the two real shockers are elsewhere. Altogether the banks hired eight QCs between them and a fleet of juniors, which means the costs will be stratospheric – and the OFT will be landed with the bill.

Secondly, the court also suggested that the OFT might nevertheless have a case under a different regulation, regulation 5, which would allow it to assess the general fairness of the charges. It will take a brave chief executive to start all over again on this basis.

Alternatively, some of the Justices suggested, Parliament may wish to amend the law. Though with a general election on the horizon, nobody's going to rush to the bookies to place a bet on anything happening any time soon.

This is not only a costly funeral for a high profile case, it will further erode the status of the OFT as an effective consumer champion while comforting large corporations that they can take on government bodies and win.

* * *

[Bigredbus]

Signed!

 

Edited November 26, 2009 by Bigredbus
Typo

[Bigredbus]

Has anyone taken the time to read 'the defendants' ('the banks') defences? It is available to read and download from the OFT website (The Office of Fair Trading: Test case - documents)...

 

Content is very interesting, moreso if you were or are a customer of any of these banks...

[Bigredbus]

Cause created on facebook...

 

with both links to the petition on 'Number 10' and 'consumer action group' websites...

 

For those of you who have a 'Facebook' account, the cause can be found under 'Support the thousands of bank charges claimants'... Becoming a member will help circulate the information throughout the web...

Edited November 26, 2009 by Bigredbus
Typo + addendum

[Bigredbus]

Cause created on facebook...

 

with both links to the petition on 'Number 10' and 'consumer action group' websites...

 

For those of you who have a 'Facebook' account, the cause can be found under 'Support the thousands of bank charges claimants'... Becoming a member will help circulate the information throughout the web...

 

Link to the 'facebook' cause page: http://apps.facebook.com/causes/407179

Edited November 26, 2009 by Bigredbus

[Bigredbus]

They will all follow... HSBC has amended their T&Cs from 01 November 2009. Sent to customers on or after SC ruling. Taps are open!

[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

[Bigredbus]

E-mailed the Chancellor of the Exchequer...

[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

[Bigredbus]

Hi Guys,

 

Anyone seen this?

 

BBC News - Lloyds to ask local courts to dismiss overdraft cases

 

TheyrCriminals

 

It is now up to the claimants and/or the banks to instruct the courts about their next move... meaning that it is up to you to instruct your local County Court to pursue your claims...

 

It is in the banks' interests to ask the courts to struck out claims... which cannot be done if you make a move first by asking your C/C to pursue the claims.

[Bigredbus]

"NIL ILLEGITIMI DESPERANDUM" Seems to keep on cropping up in my thoughts, with the emphasis on the "ILLEGITIMI":p

 

Does anyone agree?

 

 

"EXEMPLO DUCEMUS"

 

Agreed... LOL

[Bigredbus]

Have a listen to Mike Daily and the lovely Angela on Moneybox.

 

The Banks are clearly rattled by the Reg 5 fight back...

 

Do you have a link, please?

[Bigredbus]

Thanks...

 

[Bigredbus]

Interesting in-house article by Raymond Cox QC, Fountain Court...

 

Read here:

 

http://www.fountaincourt.co.uk/uploads/publications/Banking%20and%20Payment%20RC%20QC.pdf

 

...specifically the Par. entitled 'Problems that have arisen in the past' in relation to bank charges...

[Bigredbus]

Isn't Angela Knight a chemist by education?

 

[Bigredbus]

Oh yeah! you mean Mrs Anthrax alias Chemical Sally.

 

How could you .....Sally will be offended at the comparison.

 

ROFL

 

[Bigredbus]

Implying seems, also, the only thing she does...

 

[Bigredbus]

I can imagine the pungent smell out of that cauldron!

 

ROFL

 

[Bigredbus]

could always stand outside a lloyds/tsb and hand out flyers lol

 

 

Seems like a good idea...

 

ROFL

 

[Bigredbus]

He sure is... trying his best... instructing a substential set of commercial barristers to come up with legal advice so the 'wagon' can roll up again!

[Bigredbus]

Let's go back to basics...

 

Unfair Terms of the UTCCR 1999

5. - (1) A contractual term which has not been individually negotiated shall be regarded as unfair if, contrary to the requirement of good faith, it causes a significant imbalance in the parties' rights and obligations arising under the contract, to the detriment of the consumer.

 

(2) A term shall always be regarded as not having been individually negotiated where it has been drafted in advance and the consumer has therefore not been able to influence the substance of the term.

 

(3) Notwithstanding that a specific term or certain aspects of it in a contract has been individually negotiated, these Regulations shall apply to the rest of a contract if an overall assessment of it indicates that it is a pre-formulated standard contract.

 

(4) It shall be for any seller or supplier who claims that a term was individually negotiated to show that it was.

 

(5) Schedule 2 to these Regulations contains an indicative and non-exhaustive list of the terms which may be regarded as unfair.

 

*significant imbalance could be construed as the inequality of bargaining power which is recognised and accepted in law

under which parties to a contract may not be equal in their power to dictate terms and conditions. The law does not accept the manifestly unfair use, by a stronger party, of his advantage in bargaining power, and may intervene by setting aside or modifying the contract to restore equity. There is, also, an element of information assymetry, when the seller ('the banks') knows more about a product than the buyer ('the consumers').

*the good faith (bona fide) element being the honest intent to act without taking an unfair advantage over another person is, in my view, the hardest point to interpret...

 

But all isn't lost...

Edited November 30, 2009 by Bigredbus