Sheriff puts Bank of Scotland to proof on bank charges

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Defence on CCA issue from HBOS (in a seperate Scottish bank charge claim case earlier this year (April) - since discontinued due to the ordinary cause being pushed for and no legal aid eligibility)

 

4. Denied. In relation to the pursuers averments regarding section 140A of the consumer credit act (the CCA) it is explained and averred that no challenge to charges may be brought under s.140A of the CCA where those charges were debited to the pursuers current account prior to 6 April 2007. Reference is made to the consumer credit act 2006, schedule 3 paragraph 14.

 

Accordingly in so far as the pursuer seeks to challenge charges from prior to that date his averments are irrelevant. Averments regarding unarranged overdraft fees from 6 April 2007 are made below. As regards returned item fees, a challenge against returned item fees based on s140A of the CCA is irrelevant.

 

Returned item fees were debited against the pursuers account not as a result of an agreement to provide credit. On the contrary, these charges were debited at a point at which the defender had refused to provide credit facilities to the pursuer. No credit agreement was entered into between the parties in relation to which a returned item fee was debited. Accordingly no challenge can be made against returned item fees under the CCA.

As regards unarranged overdraft fees from 6 April 2007, it is explained and averred that the first step in considering the pursuers challenge is identification of the relevant credit agreement. It is explained and averred that the current account agreement between the pursuer and defender is not a credit agreement in terms of the the CCA.

At the point at which the banker/customer contract was entered into between the parties it was not possible to say whether the relationship would result in indebtedness of the pursuer to the defender. Thus at the point which the current account was opened there was no agreement to provide credit. The current account agreement was not therefore a credit agreement in terms of the CCA.

The crdit agreement to be considered was the agreement entered into between pursuer and the defender on each occasion at which the defender agreed to provide credit facilities. In the context of the current action an agreement was entered into on each occasion when the defender agreed to the request of the customer for previously unarranged overdraft facilities.

However, although for the purposes of s140 of the CCA that is the relevant credit agreement, it does not follow that the unarranged overdraft fees debited on each of those occasions should be considered to be the price payable for the provision of that credit.

The unarranged overdraft fees are part of the package of remuneration payable to the defender for the whole range of services made available by them (as are the returned item fees). Accordingly in so far as the pursuer contends that the cost of the unarranged overdraft fees is excessive compared to the events giving rise to them no relevant issue under s140A of the CCA arises.

It is further explained and averred that in relation to the merits of the challenge under s140A against unarranged overdraft fees debited to the pursuers account from 6 April 207 the relationship between the pursuer and the defender is not unfair.

In deciding whether the relationship between the parties was or is unfair the court must have regard to the factors provided for at s140A(1)(a) to ©.

As regards (a) there is nothing unfair in the banks terms. As regards (b) and © it is explained and averred that the defender has not exercised its rights unfairly. Reference is made to the findings of the OFT in its December 2009 statement to the effect that “banks generally order the sequence of payments where possible in a way that is not harmful to or even benefits the interest of customers”. The said statement is produced and held to be repeated herein for the sake of brevity. In so far as the pursuers criticism concern a lack of competition such criticisms are not a relevant consideration under s140A of the CCA.

It is further explained and averred that in deciding whether to make a determination under s140A the court is required to take into account all matters it thinks relevant. It is explained and averred that the court ought to take into account the whole of the services made available to the pursuer under the banker customer contract. Reference is made to the averments in answer 3 which are held to be repeated herein brevitatis causa.

 

Hope it helps discussions on the subject.

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I expect you have read it but as a reminder, there is lots of useful and interesting stuff in Coutts v Sebastyn about whether CCA applies (it was mainly with reference to the application of the determination quoted earlier in this thread) and some interesting OLD (ie pre test case judgment) quotes from the OFT. Conclusions para 36 onwards discuss a lot on the application of the CCA to unauthorised ODs.

 

 

Main bit which appears to answer the concerns over the CCA applying at all is thus;

 

1. It is common ground:
   
   (a) that the agreement for an overdraft of £2,000 in the terms of
   
   Coutts
   
   ' letter dated 5 April 2002 was a regulated debtor-creditor agreement within the meaning of sections 8 and 13© of the Act, providing for 'running-account credit' within the meaning of section 10(1)(a) of the Act (in effect, a revolving credit within the agreed credit limit of £2,000); and

 

 

 

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Under the UTCCR if a term is vague or not in plain intelligible language the meaning most favourable to the consumer applies.

 

However the judge in the test case has deemed the majority of specific charging terms as in plain intelligible language.

 

How that reads across to the CCA I don't know.

Edited June 21, 2010 by 008139

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Customers hit by ?death blow? in bid to sue banks - Herald Scotland | News | Home News

 

http://www.consumeractiongroup.co.uk/forum/oft-test-case-updates/267929-santander-succeed-having-charges.html

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?Challenge charges despite bank ruling? (From Echo)

 

 

That's you ?

Edited July 15, 2010 by 008139

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TheyrCriminals - did you get chance to read through Scrivener's Opinion on the UTCCR aspects ?

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Is there a link ?

 

Not one I am able to post, although it is a public document.

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Didn't think of uploading it. Thank you SFU.

 

In addition to that attached above, this is the supplement of the Opinion from Anthony Scrivener QC mentioned at paragraph 106.

 

 

edit: uploaded Opinion as well as it seems to have vanished from seriouslyfedup's previous post.

 

 

If theres a problem with the PDF's then a text version could be posted as it has been on MSE although it would take up a number of posts.

Bankchargesopinion_supplement.pdf

Bankchargesopinion.pdf

Edited July 20, 2010 by 008139

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... ask solicitor/barrister to set up private account to fight banks .... start donations into it... when it hits certain targets they do the work...

 

What kind of work are you thinking ?

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Thanks Caro

Edited July 23, 2010 by 008139

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I don't agree that '' just 2 charges per week can take away your total IS AND leave you owing more) is automatically breaking the law ''

 

It may break current lending code guidance but there is no law against bank charges being taken from an individuals account, as far as I am aware.

 

12. It should be noted that benefits and pensions are normally protected from any form of assignment. The legislation is designed to protect the recipient from themselves and/or unscrupulous third parties, so as to ensure a minimum income for the intended recipient to meet their basic needs. However, once such benefits are paid into a current account, they no longer benefit from such statutory protection, and the banks are able to access them without any concern for the basic needs of the intended recipient.

 

It is basically, in the eyes of the law as it stands, the individuals choice to incur and pay bank charges. It is, I believe, an area being looked at within the LSB and OFT working groups on the future of banking and the opt out of informal overdrafts that we will see reported on, and hopefully implemented, in September.

 

However terms which force consumers into a cycle of debt may be considered unfair under the UTCCR, as well as creating an unfair relationship under the CCA.

 

Individuals can also use their first right of appropriation to set aside money for essential living expenses if they do find they have incurred charges. Whether the banks accept the request or not is ridiculously varied from bank to bank and case to case and the area needs more work.

 

Just my opinion.

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Indeed, how is this possible when benefits MUST be paid into a bank account

I receive my IS and CTC into a Post Office Card account, however I do agree that it has become very difficult to have benefits paid any other way than into a bank account, and it has also become the most economical way to pay bills, if you exclude charges.

 

Housing Benefit cannot be paid into the Post Office Account - however in certain cases it can be paid direct to your landlord.

 

Added:

Where does it say in law that "once such benefits are paid into a current account, they no longer benefit from such statutory protection"? Indeed, how is this possible when benefits MUST be paid into a bank account

in relation to social security benefit paid into bank accounts, while most social security benefits are exempt from arrestment, in terms of section 187 of the Social Security Administration Act 1992, that statutory protection is lost once benefit has been paid into a bank account.

from http://www.scotland.gov.uk/consultations/justice/civob-00.asp Edited July 23, 2010 by 008139
added a reference

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How benefits and pensions are paid : Directgov - Money, tax and benefits

Customers can also use a Post Office card account (POca). This is a simple account specifically designed for the payment of benefits and pensions from government departments. From 23rd March 2010, if you are a Post Office card account holder, you will be able to access your account via Post Office® branded cash machines. This is in addition to using the counter service.

I think there are around 4.3 million POCA's in use (that's a 2006 figure I believe) - this is reducing though with the governments financial ''inclusion'' work and the jobcentres targetted (source Hansard Feb 2nd 2010) marketing of bank accounts over POCA. POCA costs the government 50p to make a payment into whereas Bank Accounts cost the government 1p (source Hansard Feb21st? 2010) Edited July 23, 2010 by 008139

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First Right of Appropriation / Benefits and Bank Charges

Your Reference:

Our Ref: TO/09/4744

Date: 18 June 2009

 

 

Dear 008139 ,

 

Thank you for your e-mail of 25 May to Kitty Ussher regarding the first right of appropriation.

 

I am sorry that Ministers has not been able to reply to you personally but I hope you can appreciate that they receive a very large volume of correspondence and it is not possible for them to respond to each letter individually. Your letter has been passed me for reply.

 

Decisions about charges for overdrafts, loan repayments or other fees for banking services are commercial matters for the banks. The Department makes payments into the account nominated by the customer. Once a benefit payment is credited to the customer’s account it merges with the existing account balance, whether this is overdrawn or in credit and there is no ring-fencing of monies paid in respect of benefit entitlement. If the account is overdrawn, the bank is fully within its rights to offset the benefit payment against the overdraft.

 

However, under the terms set out in the Banking Code, banks are obliged to deal with all cases of financial difficulty sympathetically and positively. Customers who find themselves in difficulty because of bank charges should contact their account provider about their needs in order to come to an arrangement to deal with their debt and safeguard their future benefit payments.

 

Yours sincerely

 

 

 

Miss C Armstrong

Ministerial Correspondence Unit

 

Royal Bank of Scotland's view of First Right of Appropriation

 

Thank you for your further e-mail of 24 March and I will look to answer the further points you have raised.

 

My earlier e-mail did not state that the first right of appropriation can be used only when the account is not overdrawn. It can be used regardless of state of the account - the only criteria are that the debits to which the appropriated fund is to be applied must be identified and the appropriated fund must be in the account no later than when the debits are presented for payment. Our experience is consistent with your statement that this right is mainly used when the customer is experiencing financial difficulties.

 

As regards housing benefit/LHA the appropriation can only work if the rent is debited by direct debit or standing order to the account.

 

You mention the bank 'encashing benefits payments' - we do not cash these cheques or similar orders as they are invariably crossed meaning they must be paid into a bank account. When paying a benefit payment into the bank account the first right of appropriation can be exercised against identified future debits.

 

As to there being no general discretion to waive bank charges, the terms and conditions of an account do state that charges will be levied if sufficient funds are not available to meet a payment. Having said that, my earlier e-mail did say that our policies, developed with the Banking Code in mind, do look to provide support to our customers. Each case will be looked at sympathetically and individual circumstances taken into account. Consideration will be given to waiving fees to help the customer but we do need customers to be open and honest with us so that we have as full a picture as possible of their circumstances.

 

Yours sincerely

 

 

 

Mike Guest

Manager, Group Customer Relations

 

Off topic a little now for this thread, my apologies.

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I don't think it is fair and it is an argument to use under the UTCCR as I stated earlier. There is a case Woods v RBS a fair while back which is agreeable to your view slightly, and Mike Dailly (in 2003) agreed, although there is also this [ARCHIVED CONTENT] Sections187and45 - epetition response | Number10.gov.uk more recently.

 

You need X amount to live on, however by choice (when it comes down to it it IS a choice, however necessary it is) you have chosen to have your money paid into an account (through ease/lack of knowledge/publicity of other methods) and chosen to incur bank charges (whether necessity forced an overdrawn situation or not). I chose to have a POCA, therefore the only person who can use my money is me, unless it is taken at source for a valid reason (benefit sanction/social fund repayment etc) that is not against the SSA 1987.

 

Banks should be treated more as Utilities as they have become an almost essential part of life in this country.

 

The unfairness is the way the banks treat you in financial hardship and force you into cycle of debt, rather than the fact that some or all of the income in the bank account comes from benefits.

Edited July 23, 2010 by 008139

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(Crossed posts before so in response to post #689)

 

I agree with your view of the ''submissions'' I posted above, however there isn't (so far as I am aware) any statute stating everything that benefits can be used to pay, which would be a little long and complicated, only statute stating what they can't be used for. Bank charges is not one of them. The law is once they are yours (ie paid into the place you wish by the method you wish - however difficult it is to have them paid elsewhere) they can be used as you wish.

 

It does need sorting legislatively, although I can see that type of legislation will be fraught with difficulties. People should have accounts which are JUST for benefit payments if they must have a bank account. Then, I believe, they have more of an argument along the lines you have stated.

 

Maybe have a word with Vince Again, just my opinion.

Edited July 23, 2010 by 008139

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I really hope you find the niggle as it would be fantastic to have this resolved as the issue has been simmering for a long time, and given me a fair few headaches of my own.

 

Nice to chat with you Bookworm.

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Thanks Aequitas. Bookworm was asking for some case law yesterday.

 

Mulvey v. Secretary of State for Social Security

Basically said that deductions to income support made by the social fund for repayment of a social fund loan would continue after bankruptcy as they were never received by the benefits claimant. Therefore, once benefits hit your account they are yours and lose the protection of the SSA.

( http://www.publications.parliament.uk/pa/ld199697/ldjudgmt/jd970313/mulv01.htm )

 

 

North Lanarkshire Council v Crossan

Sheriff Court of South Strathclyde, Dumfries and Galloway at Airdrie July 2007

I agree with counsel for the pursuers' submission that payments alimentary in nature may lose that character. The obligation to account for alimentary payments owed by the Department of Work and Pensions to the common debtor was discharged. The funds were paid into the bank and were available for the common debtor's use. She chose, for whatever reason, not to use them. They remained in her bank account and I do not accept the submission for the common debtor that the fact that they were not in-mixed with other funds makes any difference in this case. Once the funds were deposited in the common debtor's bank account she was vested in them. The nature of the relationship between customer and banker is then the relevant one to determine this issue.

.....

The funds then, once paid in my view cease to he protected in terms of the legislation. The legislation in the modern statutes is clear and in my opinion the intention of Parliament was to protect what could be termed as the initial relationship being the obligation which existed between the payer and the payee. Once the situation moves to what is really the secondary relationship between banker and customer the protection is lost. The funds held by the bank are then arrestable and the common debtor's argument fails.

Edited July 24, 2010 by 008139

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Why has the QC's Opinion been taken down ?