Sheriff puts Bank of Scotland to proof on bank charges

[rdm2006]

People may not directly have said that banks cannot charge for their services, but that is what the arguments advanced were effectively saying.

 

I disagree, we only ever said that the charges should be to cover costs (as described) no more no less

[Aequitas]

I disagree, we only ever said that the charges should be to cover costs (as described) no more no less

 

But that makes no economic sense. If all bank charges are to be set at a level that only covers the cost how is the bank to make a profit by providing banking services?

[rdm2006]

But that makes no economic sense. If all bank charges are to be set at a level that only covers the cost how is the bank to make a profit by providing banking services?

 

The same way that they always used to by investing our money and keeping the profits from that.

 

edit - remember the profit from charges (even when they are as excessive as they are) is only 30% of the overall profit

[bustthematrix]

I think the issue of profitability and distribution of charges across products and services is more for the banks to decide.

 

Fairness is not, in my view.

 

The point is that the charges were not fair in that they were not proportionate to either the 'offense' (i.e. breach) nor the costs/disadvantage (or whatever label is placed on it) to the banks. This is why to date, they've steadfastly refused to even produce that information. They certainly chose not to rely on it wrt to their SC defense.

 

People certainly don't mind paying for things, they just don't like being royally ripped off!!!!

[rebel11]

Unfortunately, Parliament asked the questions and got answers, 'the charges only cover our costs', 'we don't make a profit', 'it doesn't subsidise free banking', going by that it's not their 'part of their 'core business'.

 

93. I would only add that, should this or any other Parliament be minded to take up

the invitation given in the last paragraph of Lord Walker’s judgment, it may not be easy

to find a satisfactory solution. The banks may not be the most popular institutions in the

country at present, but that does not mean that their methods of charging for retail

banking services are necessarily unfair when viewed as a whole. As a very general

proposition, consumer law in this country aims to give the consumer an informed choice

rather than to protect the consumer from making an unwise choice. We buy all sorts of

products which a sensible person might not buy and some of which are not good value for

the money. We do so with our eyes open because we want the product in question more

than we want the money. 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.

[Peterbard]

The problem there is that they are not default charges. This was established in all 3 test case judgments and was one of the principle reasons that they weren't penalties - because no breach or default occurred.

 

Hi

So it was decided that these charges where not triggerd by the default of the debtor?

 

My understanding ws that the court found that the charges made where not due to the contractural breach , if they where they would have to be proportionate to their actual losses due to that breach under common law.

 

But the charges were in my understanding still due to the default of the debtor.

Peter

Peter

[bustthematrix]

The problem there is that they are not default charges. This was established in all 3 test case judgments

Please clarify? Do you mean in the three seperate hearings at 3 levels of court, with the SC being the 3rd and final or do you mean the seperate test cases used by the OFT for their arguments?

and was one of the principle reasons that they weren't penalties - because no breach or default occurred.

Hi Contador

It's not clear to me what you are saying. Are you saying

1. The banks said they're not charges or penalties so therefore they are not or

2. The court agreed with the banks that they are not so therefore they're not? or

3. Regardless of 1. or 2. , they actually are not default charges/penalties, they're something else. If so, what exactly are they?

 

Bear in mind what the banks themselves have said they were, in writing, directly to millions of consumers as well as in testimony to the Treasury Commmitee.

 

Are you suggesting the banks have always being precise as to what these charges represented from day one and have steadfastly stuck to that line?

[Aequitas]

But the charges were in my understanding still due to the default of the debtor.

 

As mentioned above, I think the way the court put it was to say that the charges were contingent on the customer going into the red.

 

Another way to look at it is to assume the bank is saying: We charge for our services charges but will waive them so long as you stay in credit.

 

EDIT: Posted before I read the post immediately above.

 

The further point is as the court said. There is an incentive to stay in credit, rather than a disincentive to go into the red.

[Peterbard]

Here's a couple of lines from the SC judgment. If you word search 'default' in the judgment it'll give you a fuller picture http://www.supremecourt.gov.uk/decided-cases/docs/UKSC_2009_0070_Judgment.pdf

 

''The charges would only be imposed in contingent circumstances and were akin to default charges triggered by a breach of contract, although they were not in fact triggered by a breach of contract because of the manner in which the contractual relationship had been expressly framed...........When the relevant facts are viewed as a whole, it seems clear that the Relevant Charges are not concealed default charges designed to discourage customers from overdrawing on their accounts without prior arrangement.''

 

Yes this is what i thought i said perhaps i expressed myself poorly.

 

Peter

[Peterbard]

As mentioned above, I think the way the court put it was to say that the charges were contingent on the customer going into the red.

 

Another way to look at it is to assume the bank is saying: We charge for our services charges but will waive them so long as you stay in credit.

 

I see what you mean does the court avoid using the word "default" in this way ? Cant see why, i thought it meerly meant not doing something that is expected unde the contract , which is of course not the same as breach, meerly my undersdtanding ,could be incorrect.

 

Peter

[Aequitas]

 

Bear in mind what the banks themselves have said they were, in writing, directly to millions of consumers as well as in testimony to the Treasury Commmitee.

 

Are you suggesting the banks have always being precise as to what these charges represented from day one and have steadfastly stuck to that line?

 

To be honest I think the banks got as confused as anyone over terminology here.

 

EDIT: Just done it again. I agree with the immediately preceding post and will go away for at least half an hour.

[Peterbard]

I'd say it like this: although most people don't incur overdraft charges and therefore most wouldn't have an expectation of doing so, everyone has a contractual right to present a payment instruction without sufficient funds which is expressly provided for in the contract.

 

 

Thank you

 

Interesting

[rdm2006]

I'd say it like this: although most people don't incur overdraft charges and therefore most wouldn't have an expectation of doing so, everyone has a contractual right to present a payment instruction without sufficient funds which is expressly provided for in the contract.

 

 

So therefore the whole bank account is a credit agreement and subject to cca

[rdm2006]

Well no because presenting a payment instruction where there are insufficient funds available is an informal request for credit. Having a contractual right to ask for credit doesn't in itself amount to a credit agreement.

 

Sorryn that was a joke hence the

[bustthematrix]

To address your point in red, all 3 courts held that the charges were not default charges and the OFT never argued that they were, only that they were ''akin'' to default charges.

 

On your other points, the courts were never asked to define what they were, but rather what they are not. However the Supreme Court held that the charges were ''in exchange for the package of banking services supplied''.

 

That banks may have described them as 'default' or 'penalty' charges in the past does not make them so in law. What ultimately defines a default, penalty or otherwise is the contractual analysis of a court.

You've not answered my question. We all know what the SC said and what the banks said they were at the SC.

 

My point is how they changed the argument along the way. Part of the issue is that the banks called them one thing for years in all of their literature including T&Cs and in letters to customers to justify the charges and then changed this prior to the SC case. You will note that pretty much all lenders rewrote their literature after the SC ruling to make it clear the charges should be seen as part of their core services!

Edited March 23, 2011 by bustthematrix

[Bigdebtor]

Contador

 

So what you're saying is "You can ASK for credit - but it's up to the banks whether they say yes or no". I.e we had a "right" to ASK - but not necessarily a right to EXPECT credit - and it seemed to rest on a whim which decision was taken - with no way of the customer knowing in advance. In the case of HBOS the charge for "yes" was a £39 unauthorised overdraft charge and the charge for "no" was a £39 "returned items" charge.

 

Either way we were left £39 worse off. To compound the insult these charges were often levied even when sufficient funds had already been deposited - but some of the funds had yet to clear. This particularly affected small businesses (like the one I used to run before HBOS run it into the ground) who might not be able to control exactly when customers would pay them but would write cheques based on promises from customers - but the cheques arrived a bit later than anticipated - or found a domino effect when a customer's cheque was bounced.

 

I'm also still not clear how they avoided a perjury charge by saying one thing to the Commons Select Committee " These charges only cover our costs - we don't make a profit on them" and another to the SC "these charges form part of our core business and contribute 30% of our profits". As someone said earlier even Houdini could have picked up a few tips from these guys!

 

Incidentally right at teh beginning of this thread I formed the impression Mike Dailly was trying to force the Banks to come clean on the actual costs of bouncing cheques, SO's or DD's - or allowing an unauthorised overdraft by honouring them. Is this still the case?

 

BD

[bustthematrix]

I can only partly agree with this.

That banks may have described them as 'default' or 'penalty' charges in the past does not make them so in law.

Whilst this is correct in the letter, surely the intention and clear statements of the banks themselves, for years, in this regard have to be considered?

What ultimately defines a default, penalty or otherwise is the contractual analysis of a court.

Only when the court is thinking and talking straight. We all know this rarely happens when it has to do with the banksters.

[bustthematrix]

On your other points, the courts were never asked to define what they were, but rather what they are not.

I wonder why not? Because they knew they'd lose probably? The truth is the banks knew exactly what they intended these to be, what they wanted these to be and what they repeatedly told their customers they were. This is why they paid out millions in refunds prior to their FSA and SC buddies helping them out with an argument they knew would win. It's also why we can still reclaim these same fees from credit card and loan companies because they are not personal current accounts.

However the Supreme Court held that the charges were ''in exchange for the package of banking services supplied''.

Just because the consumer lost that battle does not mean he should have lost it.

[Peterbard]

Contador

 

So what you're saying is "You can ASK for credit - but it's up to the banks whether they say yes or no". I.e we had a "right" to ASK - but not necessarily a right to EXPECT credit - and it seemed to rest on a whim which decision was taken - with no way of the customer knowing in advance. In the case of HBOS the charge for "yes" was a £39 unauthorised overdraft charge and the charge for "no" was a £39 "returned items" charge.

 

Either way we were left £39 worse off. To compound the insult these charges were often levied even when sufficient funds had already been deposited - but some of the funds had yet to clear. This particularly affected small businesses (like the one I used to run before HBOS run it into the ground) who might not be able to control exactly when customers would pay them but would write cheques based on promises from customers - but the cheques arrived a bit later than anticipated - or found a domino effect when a customer's cheque was bounced.

 

I'm also still not clear how they avoided a perjury charge by saying one thing to the Commons Select Committee " These charges only cover our costs - we don't make a profit on them" and another to the SC "these charges form part of our core business and contribute 30% of our profits". As someone said earlier even Houdini could have picked up a few tips from these guys!

 

Incidentally right at teh beginning of this thread I formed the impression Mike Dailly was trying to force the Banks to come clean on the actual costs of bouncing cheques, SO's or DD's - or allowing an unauthorised overdraft by honouring them. Is this still the case?

 

BD

 

Hi

 

If it is established that the charges were not a consequence of the breach of an agreement i do not see what benifit it would be to prove the charges were in access of the costs.

 

Wouldnt they say that they were merely making a profit from a business transaction.

 

Peter

[johnnymitch]

It always for claimants to prove charges were unfair, which historically was never easy given the banks failure to disclose their true business model etc.,

 

That is the crux ..... the moral part being that the banks were telling customers (in writing) that what they were charging was what it cost them to administer the overdraft being exceeded , then they admitted to the highest court in the land that it was 'Part of their core business '.....

 

Why the SC didn't censure them for that at least , I find it difficult to comprehend ... especially as Lord Phillips said the otyher night that , had he gone with his instincts he'd have found in favour of the customers .......... just goes to prove , the Laws , which should benefit the people ,, in many cases don't ... therefore the law is an ass .. in this case ... in my humble submission ..you honour !

 

Rant over ..... lol

[HSBCrusher]

dark deals done in dark halls and smoky rooms.

[rebel11]

Barclays state that their comments regards Penalty Charges made to the Treasury Committee are a matter of Public Record.

[bustthematrix]

Yes I know that banks changed the presentation of the charges - I'm not sure what you're asking me though.

No worries, by your recent comments, I think you've ceded my point.

 

Basically, the banks lied and chanced it; their FSA and supreme court buddies helped out. I also understand the judiciary were heavily 'leant on' secretly as all this was concluded in the throes of the 'credit crisis' remember. Some banks apparently suggested losing this battle could knock them over...too big to fail and all that...or they'd have to start charging for ATM withdrawals, cheque clearances etc. Similiar to how some charges are still levied on business accounts here and more widely in many EU states.

[Guest]

So therefore the whole bank account is a credit agreement and subject to cca

 

 

see for eg the 'Examples' under the cca itself.

also, see the 'new' rules under the consumer credit regulation(s) (SI) 2010.

imo

[Guest]

..

Edited March 23, 2011 by Ford
duplicate post deleted