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Supreme Court verdict - UTCCR inapplicable to bank charges

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Following an appeal by the banks, hours ago the Supreme Court returned a surprise verdict that:

 

Unfair Terms for Consumer Credit Regulations legislation cited by the OFT is inapplicable to the level of bank charges.

 

The bank charges struggle was catapulted to prominence in April 2006 by a tidal wave of customers challenging them as excessive and therefore unlawful.

 

A High Court Test Case in January 2008 brought by the OFT against 8 banks led to a ruling in April 2008 that the charges were service fees not penalty charges but subject to oversight by the OFT under the terms of the UTCCR. This was appealed by the banks to the Court of Appeal which ruled against them.

 

In June 2009 the banks appealed against this verdict to the new Supreme Court of the UK (open for business from October 2009, with 12 Law Lords presiding who do not participate in the legislative House of Lords), and this morning the verdict came. The Law Lords said reference to the European Court was unnecessary. The Supreme Court did not give the OFT leave to appeal to the European Court. There may be other avenues for tackling the banks, but for the 28-month 15-billionpound lawsuit which started in July 2007 this is the final verdict, there is no appeal.

 

Consumer group leaders are studying the judgment, but some have conceded that this morning's ruling is a significant setback. The latest ruling explicitly says that the OFT continues to have an overseer's role to assess the level of bank charges, but on other grounds yet to be spelt out, not under the clauses of the UTCCR which the OFT previously cited.

 

This ruling does not apply to credit card overlimit and late payment charges such as from Egg where to date lenders have made no attempt to reclassify penalty charges as service fees. The 1911 Dunlop-v-Garage ruling against penalty charges levied for profit rather than tit-for-tat compensation continues to apply as a precedent ruling until the courts rule otherwise.

 

LATEST ADVICE ON BANK CHARGES CLAIMS - 26th November 2009

ACTION MAY BE NEEDED TO AVOID CLAIMS BEING WRONGLY STRUCK OUT

http://www.consumeractiongroup.co.uk/forum/announcement.php?f=170&a=169 - by Bankfodder

 

http://news.bbc.co.uk/1/hi/business/8376906.stm

 

http://business.timesonline.co.uk/tol/business/law/article6931039.ece

 

http://www.timesonline.co.uk/tol/money/consumer_affairs/article6932522.ece

 

http://www.timesonline.co.uk/tol/money/consumer_affairs/article6932637.ece

 

http://uk.news.yahoo.com/22/20091125/tts-uk-banks-overdraft-ca02f96.html

 

Bank charges verdict due

 

Video: Bank charge test case ruling duecleardot.gif

 

- ITN NEWS

 

Historic bank charges case decision nears - moneyfacts.co.uk

 

UK Banks Win Appeal, Safeguarding Account Charges

 

CompareAndSave.com

 

Money Saving Expert

 

Bank charges ruling marks black day for consumers

 

 

 

http://www.supremecourt.gov.uk/docs/uksc_2009_0070_ps.pdf

 

25 November 2009 PRESS SUMMARY

 

Office of Fair Trading (Respondents) v Abbey National plc & others (Appellants) [2009] UKSC 6

 

On appeal from the Court of Appeal (Civil Division) [2009] EWCA Civ 116

 

JUSTICES: Lord Phillips (President), Lord Walker, Baroness Hale, Lord Mance, Lord Neuberger

 

INTRODUCTION:

 

This appeal involved a relatively narrow issue. The Supreme Court had to decide not whether the banks’ charges for unauthorised overdrafts were fair but whether the OFT could launch an investigation into whether they were fair.

 

At present, banks provide retail banking services on the basis that customers whose accounts are kept in credit (in other words who lend money to the banks) will not be charged for the services provided; customers who have authorised overdrafts will be charged interest on the money that they borrow from the bank; and customers who incur unauthorised overdrafts will be charged, not only interest on the sums borrowed, but fixed fees for each particular service involved.

 

The OFT has power to assess the fairness of terms in consumer contracts but this is subject to the limits laid down in the Unfair Contract Terms in Consumer Contracts Regulations 1999, which implemented European Council Directive 93/13/EEC.

 

Regulation 6(2)(b) states that the assessment of the fairness of a term in a contract “shall not relate . . . to the adequacy of the price or remuneration, as against the goods or services supplied in exchange”. In other words, the “value for money” equation is excluded. The Court of Appeal held that this exclusion applied only to the “core terms” of the contract and not to ancillary terms such as the charges for unauthorised overdrafts. The Supreme Court unanimously held that the charges for unauthorised overdrafts fell within this exclusion. They were part of the price paid by the customer for the banking services provided. However, the charges might still be open to assessment by the OFT on other grounds under Regulation 5.

 

BACKGROUND TO THE APPEAL:

 

The Office of Fair Trading (‘the OFT’) wished to investigate the fairness, under the Unfair Terms in Consumer Contracts Regulations 1999 (‘the Regulations’), of the terms (‘the Relevant Terms’) in the Appellant banks’ contracts with customers imposing charges (‘the Relevant Charges’) on unauthorised overdrafts. The Regulations implemented European Council Directive 93/13/EEC. The OFT applied for a declaration that it was entitled to make such an investigation, notwithstanding Regulation 6 (2) (b) of the Regulations, which stated that the assessment of fairness of a term in a contract ‘shall not relate… to the adequacy of the price or remuneration, as against the goods or services supplied in exchange’. Both the High Court and the Court of Appeal decided that Regulation 6 (2) (b) did not stop the OFT from making such an investigation. The banks appealed.

 

JUDGMENT

 

The Supreme Court unanimously allowed the appeal by the banks.

 

REASONS FOR THE JUDGMENT

 

Lord Walker made clear that the scope of the appeal was limited – the court did not have the task of deciding whether or not the system of charging current account customers was fair, but whether the OFT could challenge the charges as being excessive in relation to the services supplied in exchange (Paragraph 3). As Lord Phillips stated, even if such a challenge was not possible, it might still be open for the OFT to assess the fairness of the charges according to other criteria (Para 61).

 

The key issue was whether the charges constituted the ‘price and remuneration’ as against ‘the goods or services supplied in exchange’ within the meaning of the Regulations. The Supreme Court considered and decided a number of arguments as to whether the charges could be said to be ‘price or remuneration’ under Regulation 6 (2) (b):

 

(1) The charges were not paid ‘in exchange’ for the transactions to which they related – eg. honouring a cheque when the customer had insufficient funds to do so (Para 75).

 

(2) The Court of Appeal was wrong to find that Regulation 6 (2) (b) did not apply to charges that were ‘ancillary’ to the core contract between the bank and customer (Paras 38-41, 47, 78, 112). Lord Walker commented that Regulation 6 (2) (b) contained no indication that only the ‘essential’ price or remuneration was relevant. In fact, any monetary price or remuneration payable under the contract would naturally fall within the language of Regulation 6 (2) (b) (Para 41).

 

(3) The charges were not concealed default charges designed to discourage customers from becoming overdrawn on their accounts without prior arrangement (Paras 88, 114). The High Court had rejected this argument and was right to do so.

 

(4) The charges were properly to be regarded as falling within the scope of the Regulations (Paras 43, 80, 104). They were in fact part of the price or remuneration paid by the customer in exchange for the package of services which made up a current account (Paras 47, 89). The fact that liability to pay the charges depended on specific events occurring was irrelevant to that conclusion (Paras 47, 104).

 

Accordingly, since any assessment of the fairness of the charges, which related to their appropriateness as against the services supplied in exchange, fell within Regulation 6 (2) (b), no such assessment could take place and so the appeal would be allowed (Paras 51, 90, 92, 118, 119).

 

Further Comments

 

Lord Phillips also noted that in the absence of the charges the banks would not be able profitably to provide current account services without a fee (Para 88). He stated that it might be open to question whether it is fair to subsidise some customers whose accounts always remain in credit by levies on others who experienced events they did not foresee when they opened their accounts (Para 80).

 

Lord Walker commented that ministers and Parliament had decided to transpose the directive as it stood rather than to confer the higher degree of consumer protection afforded by the national laws of some other member states. Parliament might wish to consider whether to revisit that decision (Para 52). Lord Mance endorsed this comment (Para 11) .

 

Lady Hale commented that if Lord Walker’s invitation to ministers and Parliament was to be taken up, it might not be easy to find a satisfactory solution. She questioned whether the real problem was not the charging model, but the lack of competition between the banks as to the product they offered (Para 93).

 

No Reference to European Court of Justice

 

The court decided that although the interpretation of the European directive which the Regulations implemented was a question of European law it was not necessary to refer the matter to the European Court of Justice (Paras 49, 91, 115, 120).

 

NOTE

 

This summary is provided to assist in understanding the Court’s decision. It does not form part of the reasons for the decision. The full judgment of the Court is the only authoritative document.

 

Judgments are public documents and are available at:

www.supremecourt.gov.uk/decidedcases/index.html

 

http://www.supremecourt.gov.uk/docs/uksc_2009_0070_judgmentV3.pdf -- 45-page full judgment

 

 

.

Edited by Mistermind
added BBC, Times

 

 

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[quote name=

 

This ruling does not apply to credit card overlimit and late payment charges such as from Egg where to date lenders have made no attempt to reclassify penalty charges as service fees. The 1911 Dunlop-v-Garage ruling against penalty charges levied for profit rather than tit-for-tat compensation continues to apply as a precedent ruling until the courts rule otherwise.

 

.

 

So we must all get our credit card charges reclaimed ASAP before our "public servants" screw up this too - as they just have with bank charges.

 

Why oh why did OFT allow this supreme court consideration to be on such a narrow point of law? - Outmanoevered by the banks' higher paid lawyers?

 

Couldn't the court have saved us all a load of time and also considered the other point they have now raised as a possible way forward?

Edited by Bigdebtor
typos

£50k saved and £7k charges refunded:

MBNA & A&L 35% F&F direct - saved £23k. Birmingham Midshires £1700 charges refunded

Abbey Loan/BCW 50% - saved £2k. Barclaycard/CSL 40% - saved £6k

Monument/DCA 35% - saved £1k. LTSB/Wescot 50% - saved £4k

HBOS Visa £5k charges refund via Blair Oliver Scott

RBS Direct Line/(genuine) solicitors June 2010 40% - saved £3k

Morgan Stanley/Aktiv Kapital £11k SB Nov 2010

Over £40k balance write off and charges refunds to fight for:

HBOS O/d Charges £5k. Egg Loan/Aktiv Kapital CCA Dispute £8k

Egg Card/Fredrickson taking £5 monthly but CCA & Charges Dispute £4k

Goldfish/1st Credit DN/TN Dispute £9k. Capital One/CSL charges claim £4k

Barclaycard/CSL taking £5 monthly on £10k debt

 

I hope I have helped - if I have please hit my star - and recognise the others who have helped too.

Bigdebtor

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Every verdict setback for consumers gives the other side encouragement and makes them more intransigent and less conciliatory all along the front.

 

Be assured this very minute Egg are concocting a new computerised template letter, making misleading claims on how today's verdict supports what they have been saying, and how adamant they are now about not refunding claims. Not to believe it. :eek:

 

There's many a slip between the cup and the lip, so all who have not reclaimed credit card penalty charges would do well to reclaim same. Bank charges claimants who did it slowly and leisurely in July 2007 about claiming, or about settling for 90% refund bird in the hand, found their claims suddenly halted overnight without forewarning.

 

28 months later they have not seen one penny refunded, and if the worst came to the worst never will.


 

 

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The new Supreme Court

 

The House of Lords is the highest court in the United Kingdom. Judges who sit in the House of Lords are life peers.

 

Their official title is Lords of Appeal in Ordinary, however they are usually known as Law Lords. There are 12 Law Lords and their role is to hear cases from the lower courts, most often the Court of Appeal. As members of the House of Lords the Law Lords can participate in the debate and enactment of Government legislation, although, in practice, they rarely do so.

 

There have, in recent years, been mounting calls for the creation of a new free–standing Supreme Court separating the highest appeal court from the second house of Parliament, and removing the Lords of Appeal in Ordinary from the legislature. On 12 June 2003 the Government announced its intention to do so and the new Supreme Court is scheduled to be open for business in October 2009.

 

Because the House of Lords has a United Kingdom remit it does not fall within the remit of the Lord Chief Justice of England and Wales.

 

Creating a new Supreme Court will mean that the most senior judges will be entirely separate from the Parliamentary process.

 

The Supreme Court

 

The new Supreme Court is scheduled to be open for business in October 2009.

 

The Constitutional Reform Act 2005 made provision for the creation of a new Supreme Court for the United Kingdom. There have, in recent years, been mounting calls for the creation of a new free standing Supreme Court separating the highest appeal court from the second house of Parliament, and removing the Lords of Appeal in Ordinary from the legislature. On 12 June 2003 the Government announced its intention to do so.

 

At present the most senior judges, the Lords of Appeal in Ordinary, or Law Lords as they are often called, sit in the House of Lords. There are twelve of them. The House is the highest court in the land - the supreme court of appeal. It acts as the final court on points of law for the whole of the United Kingdom in civil cases and for England, Wales and Northern Ireland in criminal cases. Its decisions bind all courts below.

 

As members of the House of Lords, this means that they not only sit judicially, but are also able to become involved in the debate and subsequent enactment of Government legislation (although, in practice, they rarely do so). Creating a new Supreme Court will mean that the most senior judges will be entirely separate from the Parliamentary process.

 

It is important to be aware that the new Supreme Court will be a United Kingdom body legally separate from the England and Wales Courts since it will also be the Supreme Court of both Scotland and Northern Ireland. As such it falls outside of the remit of the Lord Chief Justice of England and Wales in his role as head of the judiciary of England and Wales.

 

The new Supreme Court is scheduled to be open for business in October 2009. In the meantime, any queries should be addressed to the Judicial Secretariat at the House of Lords, London, SW1A 0PW.


 

 

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What about the Francovitch Ruling...!

Hi Angry Cat, all best wishes to you. :)

 

The five Law Lords unanimously agreed that the letter of that Regulation as it stands excludes the "value for money" criterion -- the law as it stands specifically does not wish to arbitrate pricing levels for commercial fees and packages between two consenting parties.

No Reference to European Court of Justice

 

The court decided that although the interpretation of the European directive which the Regulations implemented was a question of European law it was not necessary to refer the matter to the European Court of Justice (Paras 49, 91, 115, 120).

 

The press release did not go into the reasons why reference to the European Court of Justice was deemed unnecessary. If you read through the full judgement do let us know. I believe Tom Brennan in court referred to bank charges in other countries. I do not recall him citing precedents of charge capping by state intervention in other EC countries.

 

Whether the spirit of the law and natural justice says otherwise is another question. It would be truly horrendous if going overdrawn 50 pence will again incur a bank charge of £39, then this charge when unable to be paid snowballing into maximum monthly charges totaling as high as £200 -- all because of 50 pence overdrawn. :eek: :eek: :eek:

 

 

Francovich principle - Wikipedia, the free encyclopedia

 

The Francovich principle or Francovich doctrine is a principle of European Union Law established in the case Andrea Francovich and Others v. Italian Republic[1] that concerned a compensation scheme which Italian workers were entitled to under a EU directive. The case established the idea of state liability for compliance with EU law.[2]

 

In Andrea Francovich and Others v. Italian Republic, workers who suffered damage when their employer became insolvent were entitled to compensation under an EC directive (Directive 80/987/EEC[3]), which required Member States to secure their protection. Since Italy had failed to implement the directive, the individual workers brought a claim before their national courts for compensation for the damage they had suffered due to this failure.

 

Since state liability is enforced through national courts, the ECJ stipulated that national procedures should determine how state liability is enforced. The procedures for claiming damages from the state before national courts must comply with the principles of

 

equivalence (to those procedures available for similar claims for damages)

 

and effectiveness (to secure that EC law is respected).

 

So long as it respects these two principles, the Member State can prescribe its own procedures for claims as regards, for example, proof and time limits.

Edited by Mistermind

 

 

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Lord Walker commented that ministers and Parliament had decided to transpose the directive as it stood rather than to confer the higher degree of consumer protection afforded by the national laws of some other member states. Parliament might wish to consider whether to revisit that decision (Para 52). Lord Mance endorsed this comment (Para 11) .

 

The Law Lords said no, but pointed to alternatives, namely whether UK laws specifically drafted for UK conditions the way "some other member states" did for themselves (How? If anyone knows, do tell us) to better protect consumers than the EC directive bodily transposed into UK Regulations, the literal wording of which defeated the OFT.

 

The new Supreme Court has been specifically created to put clear blue water between itself and the legislative House of Lords. Perhaps thanks to this separation it was better able to comment on the legislature, dropping a hint to the House of Commons.

Edited by Mistermind
typo

 

 

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Everyone seems to be focussing on the unfair charges for an "unauthorised overdraft". What about the charges when the bank bounces a direct debit or cheque and so refuses to allow the unauthorised overdraft? In some ways these are worse since your bill is not paid, you have been charged £35 or so - and the creditor is now p***ed off with you and charges you further for late payment - AND re-presents the cheque or dd the next week - before you hav emanaged to get below your overdraft limit - and so the cycle of deeper debt due to unfair charges continues. Did I miss this being covered on Wednesday?

 

BD


£50k saved and £7k charges refunded:

MBNA & A&L 35% F&F direct - saved £23k. Birmingham Midshires £1700 charges refunded

Abbey Loan/BCW 50% - saved £2k. Barclaycard/CSL 40% - saved £6k

Monument/DCA 35% - saved £1k. LTSB/Wescot 50% - saved £4k

HBOS Visa £5k charges refund via Blair Oliver Scott

RBS Direct Line/(genuine) solicitors June 2010 40% - saved £3k

Morgan Stanley/Aktiv Kapital £11k SB Nov 2010

Over £40k balance write off and charges refunds to fight for:

HBOS O/d Charges £5k. Egg Loan/Aktiv Kapital CCA Dispute £8k

Egg Card/Fredrickson taking £5 monthly but CCA & Charges Dispute £4k

Goldfish/1st Credit DN/TN Dispute £9k. Capital One/CSL charges claim £4k

Barclaycard/CSL taking £5 monthly on £10k debt

 

I hope I have helped - if I have please hit my star - and recognise the others who have helped too.

Bigdebtor

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Everyone seems to be focussing on the unfair charges for an "unauthorised overdraft". What about the charges when the bank bounces a direct debit or cheque and so refuses to allow the unauthorised overdraft? In some ways these are worse since your bill is not paid, you have been charged £35 or so - and the creditor is now p***ed off with you and charges you further for late payment - AND re-presents the cheque or dd the next week - before you hav emanaged to get below your overdraft limit - and so the cycle of deeper debt due to unfair charges continues. Did I miss this being covered on Wednesday?

 

BD

 

The Judgment

 

To discuss this question it will be necessary to look at the big picture and the history of this movement. Anyone with the time may like to read the full 45-page PDF judgment with link provided in the opening post. In this doc all 5 law lords give reasons for ruling against the OFT, in favour of 7 banks and 1 building society. The five eminent judges at the top of their profession write lucid prose that laymen can understand. They disagreed with the judges in High Court and Court of Appeal. Facing five law lords on Wednesday,

 

........the OFT fielded 3 barristers including 1 QC

........the banks fielded 23 barristers including 9 QCs. :eek:

 

Evidently the banks not the people were the big battalions. This came as the final battle in a 3.5-year war potentially deciding 15-20 £billion charges refund. A battle now finally lost, but many say the war has only started. But from here it will be a long haul.

 

Prior struggles

 

Although the consumer refunds movement started with Stephen Hone v Abbey Bank in 2005 his victory came in the shape of favourable settlement out of court, and the public at large knew little about it. It was not until the OFT pronouncement on 5th April 2006 warning credit cards to cap their penalty charges at £12 or else, that the trickle of charge reclaims turned into a flood then a tidal wave.

 

The principal precedent was Dunlop-v-Garage 1911, where Dunlop was forced by the court to refund to the garage an excessive penalty charge levied to make a profit rather than as proportionate compensation for breach of contract. Credit cards and banks did not have appetite to risk an adverse ruling so settled before court after making it as difficult as possible for claimants.

 

A turning point

 

One year later, on 17th April 2007 came a judgement in county court in the case of Kevin-v-LloydsTSB. Kevin claimed refund of charges and higher-rate overdraft interest on the grounds they were profit-making penalties as in Dunlop-v-Garage. District Judge Cooke disallowed Kevin's claim, ruling that Kevin had failed to prove breach of contract in view of contraditory T&C, and basically concluded that with no contract breach proven as trigger, the charges were fees not penalties, being part of a bundle of bank (optional) lending services. Judge Cooke was careful to say in a concluding paragraph he viewed the credit card charges situation as very different.

 

Following this cause celebre success Lloyds TSB stiffened their stance. They sent out a letter to their ongoing claimants, saying they will fight in court tooth and nail against reclaim of all charges levied for cheques honoured while exceeding overdraft limit. This letter was deafening in its silence about fighting against reclaim of charges made for bouncing cheques and DDs. In bouncing a bad cheque the bank incurred no risk of bad debt, just an inconvenience for branch managers and automated IT systems. They should be entitled to recoup the cost of said inconvenience variously estimated between 50 pence and £3 per bounce. In Ireland banks did charge £3, but in England it was up to £39, the same vertiginous sum across the border in Northern Ireland where banks were owned by English banks. Following the 3-year nationwide outcry some banks have now broken rank and reduced their bounce charges.

 

In June 2007 in CAG Lloyds Forum, poster A posed the question -- he was pursuing Lloyds charges reclaim of £10,000, 95% of which was made up of Type 1 charges (for bouncing only), plus 5% for Type 2 (for honouring bad cheques breaching overdraft limit). Lloyds lawyers were refusing refund of his Type 2 reclaim but not Type 1. Poster A wanted to know what to do? Poster B explained the background pointing out the obvious strategy change by Lloyds, suggesting that Poster A take the 95% bird in hand offer before something goes wrong.

 

Prestigious Poster C then dived in, ridiculing and abusing Poster B saying Kevin-v-Lloyds verdict was an unintentional accident and a blip ruling, that Poster B's reasoning was flawed, that there was no such difference as Type 1 or Type 2, that Poster A should carry on reclaiming 100% slowly and methodically in the way Poster C had been directing the forum. Poster A believed Poster C. Poster B withdrew from posting further on this subject.

 

A few weeks later the curtain came down without warning. On 31st July 2007, immediately after the defeat of Brennan-v-NatWest, the OFT announced their Test Case against the banks, and the courts under direction from the Master of Rolls stayed claims cases nationwide awaiting the Test Case. In the 28 months since, Poster A has not seen one penny refund. Poster C also stopped posting.

 

Penalty charge or service fee

 

Penalty charges on credit cards are fundamentally different from charges levied by banks, in that cards have never had flexible arrangments allowing cardholders to go overdrawn. There is a rigid card limit. When this is breached, authorisation in the shops will decline the transaction. When the card limit is breached due to lack of monthly payment this triggers a monthly Overlimit Charge explicitly announced in the T&C as a penalty for contract breach. Dunlop-v-Garage refund precedent therefore remains applicable until the courts rule otherwise.

 

Banks' justification for the bounce charge

 

Banks act as discretionary flexible money lenders allowing scope for manager intervention and overdraft breach. A bounced cheque or DD, in theory, could also have been honoured. Manager time, in theory, could have been spent mulling over the decision to bounce or not bounce.

 

What 3 courts agreed

 

The banks make out that maintaining an account, either bouncing bad cheques or honouring same, for a fee, are all part of the same bundle of services, with rights and obligations on both sides agreed beforehand. The charge for bouncing, they contend, is not tit for tat, item for item, but part of the whole and priced as a bundle. True, this pricing favours those who do not go overdrawn and enjoy free banking thanks to those who bounce cheques and exceed limits thereby incurring steep fees and how. In Ireland with low bounce fees, all customers do pay a quarterly charge although there are concessions to encourage the best customers.

 

In the real world when going unintentionally 50p overdrawn and unable to pay the penalty chage of £39, it is possible for that account to attract £200 further charges per month, eventually ending in CCJ, house sale, all for 50 pence. This is not fantasy as real life instances are ten a penny.

 

The High Court, the Court of Appeal and the Supreme Court having all agreed that bank charges are service fees not penalty charges it seems unlikely to me county or small claims courts will now find for the customer based on Dunlop-v-Garage penalty charge precedent, for bounce charges as much as for overdraft breach charges. Whereas there is the Dunlop precedent for challenging penalty charge, there is no legal precedent yet that I know of for challenging steep service fees.

 

Except for one special situation

 

Lloyds TSB operate Islamic Accounts. Clearly spelt out in T&C, these accounts do not allow for overdrafts and attendant debit interest ever, as lending/borrowing money with interest is against strict shariah law. For these accounts according to the T&C the last time I looked, apparently bad cheques will still be bounced when presented, incurring the usual charge. But as there is no possibility of honouring bad cheques and no possibility of lending money with attendant risk of bad debt, the bounce would seem to be a penalty pure and simple, needing to be commensurate with the inconvenience according to Dunlop. In the case of Islamic accounts or similar accounts Lloyds acts as custodian and bookkeeper not as lender. The lending service package/bundle therefore does not exist. The bounce charge would appear to stand on its own as a penalty and ought to be subject to the Dunlop precedent.

 

Defeat on Regulation (6)(2)

 

The OFT never tried to challenge over-steep bank charges based on the Dunlop precedent. They wanted to arbitrate a fair level for "bank service fees". However, unlike the two lower courts the Supreme Court ruled that UTCCR 1999 Regulation (6)(2) imported without change from European Directive 1993 specifically ruled out intervention on price.

 

The law lords also pointed out an alternative route for OFT intervention -- UTCCR Regulation (5) relating to an unequal relationship between trader and consumer. If that is taken up it would be another struggle, a long one, no doubt again with appeals all the way to the Supreme Court. If any claims cases for year 2000 charges which have been waiting for 3 years are now discontinued or dismissed, then if a new claim were lodged in year 2011 following a new Test Case launched by the OFT, that new claim can only go back to 2005 charges unless you believe the 6-year Statute of Limitations does not apply.

 

WHY NO STATE INTERVENTION?

 

More than one law lord as good as interpreted the European Directive to say, price intervention is not for the state, price setting is for market forces. This is fine if there were a free market and vigorous competition for UK banks. In practice since WW2 small high street banks in the UK have been swallowed by big banks until we now have a near monopoly of dominant banks. Irish banks do charge less, but it is hardly practical to live in England but bank in Ireland or France.

 

It would be libelous to say UK banks operate a price-fixing cartel, so I shall be careful not to say UK banks operate a price-fixing cartel. Has anybody heard me say UK banks operate a price-fixing cartel? No, I would not dream of saying UK banks operate a price-fixing cartel, perish the thought. :eek:

 

In the real world the Westminster government is now the major shareholder with a matching voice in the high street bank boardrooms. If in between claiming parliamentary expenses they find some time to influence bank policy they could tackle the human tragedies of 50 pence overdrawn leading to a fresh debt of £200 per month, every month. The last word goes to one of the Law Lords -- Lady Hale:

 

Should financial services be treated differently from other goods and services? Or is the real problem that we do not have a real choice because the suppliers all offer much the same product and do not compete on some of their terms?

 

This is the situation here. But it is not clear to me whether the proper solution is to find some way of forcing the suppliers to compete with one another in the terms they offer or whether the solution is to condemn one particular model of charging for those services.

 

Fortunately, however, that is for Parliament and not for this Court.

 

Edited by Mistermind
typos

 

 

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Penalty charge or service fee

 

Penalty charges on credit cards are fundamentally different from charges levied by banks, in that cards have never had flexible arrangments allowing cardholders to go overdrawn. There is a rigid card limit. When this is breached, authorisation in the shops will decline the transaction. When the card limit is breached due to lack of monthly payment this triggers a monthly Overlimit Charge explicitly announced in the T&C as a penalty for contract breach. Dunlop-v-Garage refund precedent therefore remains applicable until the courts rule otherwise.

 

Defeat on Regulation (6)(2)

 

The OFT never tried to challenge over-steep bank charges based on the Dunlop precedent. They wanted to arbitrate a fair level for "bank service fees". However, unlike the two lower courts the Supreme Court ruled that UTCCR 1999 Regulation (6)(2) imported without change from European Directive 1993 specifically ruled out intervention on price.

 

The law lords also pointed out an alternative route for OFT intervention -- UTCCR Regulation (5) relating to an unequal relationship between trader and consumer. If that is taken up it would be another struggle, a long one, no doubt again with appeals all the way to the Supreme Court.

 

In the real world the Westminster government is now the major shareholder with a matching voice in the high street bank boardrooms. If in between claiming parliamentary expenses they find some time to influence bank policy they could tackle the human tragedies of 50 pence overdrawn leading to a fresh debt of £200 per month, every month.

 

Mistermind - Thanks for that very full answer.

 

Just a couple of points:

 

1. I have credit card and bank statements which do show that despite the online authorisation, they have allowed transactions to be processed which have taken me over - when I would have preferred them to be bounced and paid by another method. Both types of organisation (if that's not an inapprpriatr description - should have a "dis" in front?) claim they give floor limits to some retailers and that authorisation does not mean I hav estayed under agreed creit or overdraft limits.

 

2. Many Statements show the payment "received" the next day after the due date - so I get stuffed with both late payment and over limit charges when I believe I paid in good time. I can't prove that these payments took a good bit longer on these occasions - but I certainly believe they did not! I tried to pay some credit cards at their own bank - HSBC - who wanted to charge me £5 for the privelige as I was not an HSBC client.

 

3. Once these companies have stuffed your credit rating it is difficult/impossible to move to the competition - so there is not free choice for the very people they are currently screwing at £39 per go.

 

Anyone else experience these obstacles put in our way?

 

BD

Edited by Bigdebtor
typos

£50k saved and £7k charges refunded:

MBNA & A&L 35% F&F direct - saved £23k. Birmingham Midshires £1700 charges refunded

Abbey Loan/BCW 50% - saved £2k. Barclaycard/CSL 40% - saved £6k

Monument/DCA 35% - saved £1k. LTSB/Wescot 50% - saved £4k

HBOS Visa £5k charges refund via Blair Oliver Scott

RBS Direct Line/(genuine) solicitors June 2010 40% - saved £3k

Morgan Stanley/Aktiv Kapital £11k SB Nov 2010

Over £40k balance write off and charges refunds to fight for:

HBOS O/d Charges £5k. Egg Loan/Aktiv Kapital CCA Dispute £8k

Egg Card/Fredrickson taking £5 monthly but CCA & Charges Dispute £4k

Goldfish/1st Credit DN/TN Dispute £9k. Capital One/CSL charges claim £4k

Barclaycard/CSL taking £5 monthly on £10k debt

 

I hope I have helped - if I have please hit my star - and recognise the others who have helped too.

Bigdebtor

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Within a week of the Supreme Court setback, a very different result on the credit card front. The much heralded Manchester Test Case involving missing agreements resulted in MBNA settling out of court:

 

http://www.consumeractiongroup.co.uk/forum/legal-issues/216538-claim-stayed-due-unenforceable-17.html


 

 

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When is the new template going to be ready for us to mount a fresh challenge against the Banks?


£50k saved and £7k charges refunded:

MBNA & A&L 35% F&F direct - saved £23k. Birmingham Midshires £1700 charges refunded

Abbey Loan/BCW 50% - saved £2k. Barclaycard/CSL 40% - saved £6k

Monument/DCA 35% - saved £1k. LTSB/Wescot 50% - saved £4k

HBOS Visa £5k charges refund via Blair Oliver Scott

RBS Direct Line/(genuine) solicitors June 2010 40% - saved £3k

Morgan Stanley/Aktiv Kapital £11k SB Nov 2010

Over £40k balance write off and charges refunds to fight for:

HBOS O/d Charges £5k. Egg Loan/Aktiv Kapital CCA Dispute £8k

Egg Card/Fredrickson taking £5 monthly but CCA & Charges Dispute £4k

Goldfish/1st Credit DN/TN Dispute £9k. Capital One/CSL charges claim £4k

Barclaycard/CSL taking £5 monthly on £10k debt

 

I hope I have helped - if I have please hit my star - and recognise the others who have helped too.

Bigdebtor

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Announcement:

Ray Cox QC to spearhead bank charges fightback

 

27th November 2009 alanfromderby (Site Team)

 

The template letters and legal advice should be available within the next two weeks via www.MoneySavingExpert.com alongside the other free campaigning sites including the Consumer Action Group, Penalty Charges and Legal B eagles - who will be feeding into this process too.


 

 

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