Lloyds "Victory" - A View of the Judgement

[Lord_Alcohol]

For me, the reasoning falls down in relation to unpaid item charges. Where, say, a DD request is presented for payment, but declined, there can be no element of 'service' to the customer in that. The essence of 'service' (and the justification for a charge) is that the customer derives some benefit from the work undertaken by the Bank. Presumably, the Bank and this District Judge take the view that there is an element of service merely in the Bank being asked and in considering (albeit ultimately declining) such a request! Pah!

 

I do wonder if, on legal authorities, there can be any middle ground between an out and out breach of contract on the one hand and a provision of service (to the customer) on the other?

 

ninekey - that's a really good point. I'm not a Lloyds claimant but this thread is applicable to all banks I would think. Hope no-one minds a NatWest customer making a contribution...

 

As you say, the banks are now apparently deeming that the charges are not penalties for breach of contract but are, in fact, "charges for services". However, as you so very succinctly put it, there is no concept of a 'service' being provided to the customer: when an item attracts a charge, there can be no doubt that it is not a service for the benefit of the customer or the payee because the item was not paid so there was no benefit at all. Furthermore, a charge is levied which may also incur overdraft interest. This is definately not a service and I would like to see the banks argue that it is.

 

If we go overdrawn because an item has not been paid, we get a letter or phone call from the bank telling us, or certainly implying, that this is bad behaviour and we need to "put things right". Putting things right might be through arranging an overdraft, but at the end of the day it is still a position which causes the bank to react in a a negative way and I would argue that they would not do this if the charge for an unpaid item was deemed a service. If it was a service then they would not get so snotty when it happens.

 

If we then consider what happens if the charge remains unpaid (ie, the account remains overdrawn for the amount of the charge) for a given period with no effort to repay by the account holder: the bank will, inevitably, serve a Default Notice which is triggered by a breach of contract (I think). So at some stage the charge has magically been transformed from a service fee to a breach of contract.

 

I wonder whether Kev should have answered "yes" to the Judge's question as to whether he thought non-payment of a cheque some considerable time after issue was a breach of contract?

 

LA

[Lord_Alcohol]

"Is it legal to charge interest on a service fee?"

 

It is a commercial service, not a Social Service. Debit interest is only charged if a service fee is not paid for. If a solicitor charges for his service at £190 per hour, and a barrister charges for his service at £3,000 per day, and if these fees are not paid within the time period agreed by contract, would it be illegal to charge interest due to late payment?

 

I understand Lloyds T&C completely disallows overdrafts on 3 types of accounts. Here I suggest no lender-borrower relationship exists, no lending service, no bad debt risk, no manual intervention, hence no justification for a service fee.

 

What an interesting thread! Mistermind, your postings are truly helpful.

 

The issue of service charge v penalty: when we are billed for a service by, for example, a solicitor, we have (a) agreed T&Cs beforehand, normally by accepting a 'pay-within' timescale clause (such as 28 days), and (b) have received an invoice giving us time to pay.

 

I understand that service providers are allowed to charge a modest rate of interest on late payment, but few do in my experience.

 

With the banks, however, the position is quite different. The 'service charge' is applied immediately with no warning and without any time to make adequate provision to remedy the situation; the 'service charge' can result in further 'service charges', such as unarranged borrowing fees; and a punitive rate of interest instantly kicks in.

 

I think that there is a world of difference between bank charges and service fees levied by service providers such as solicitors, and would love to see the banks show clearly that their charges are not penalties.

 

In my own case with NatWest, and it's probably the same with Lloyds, I have many letters regarding unpaid items which say "As dealing with unpaid standing orders or direct debits means extra administrative work I have charged a fee of .... blah blah". That looks to me like an application for liquidated damages and not the offer of a 'service'.

 

Maybe if the banks made these charges in the same way as other service providers, perhaps by invoicing or making the charge at the end of the following month and not immediately with no warning, then they might have a case: as it is, I do not think that they have a leg to stand on and we should all surge forward and take back what is rightfully ours.

 

LA