Office Of Fair Trading Test Case

[crfx250]

The FSA have confirmed that the banks asked for the case. Some kind of

test case was inevitable so it made sense for the banks to initaite it and

therefore control the timetable, the agreement, the waiver and the terms and extent of refunds if the charges are proved unlawful.

 

I've no doubt the OFT jumped at the chance to be seen as being pro-active.

[crfx250]

As I understand it, evidence from the banks to the OFT of how much breaches cost are not relevent untill there is a legal ruling on whether UTCRR aplies. Surely the application of UTCRR is the test as to whether the charges are lawful or not.

 

It is notable that the test case agreement does not include any reference to disclosure of the banks charge costs and will only come into play once the application of UTCRR is established.

[crfx250]

The discussions between the banks/OFT/FSA about the agreement of

the test case were going on way before June.

 

I believe the A&L case has been settled out of court anyway so disclosure

won't be made

[crfx250]

I think you are right about the stalking horse theory. I know CAG was keen to back the case but the circumstances since then have changed.

[crfx250]

I sincerely believe that this OFT case has been on the cards for a long time. DS

 

I would agree. The OFT were due to announce the findings of their inquiry

into penalty charges in March but then issued the 'no quick fix' statement

on 29 March so they must have delayed it knowing a test case was on the cards.

 

Apart from anything else it must have taken at least 6 months for all the

parties to agree on the terms of the case. With 8 banks, the BBA, OFT, FSA and the FOS all with thier own hordes of lawyers, it's not the sort of

agreement you could knock up in a few weeks.

 

My FoIA request (below) is due for a response tomorrow and might shed

a bit more light on it.

 

 

Dear FSA FoIA coordinator

 

I am writing to you to request information about the July 26 announcement 'FSA grants waiver on complaints handling'.

 

This is a request under the Freedom of Information Act 2000 and I believe should not be subject to any of the qualified or absolute exemptions.

The request is in 6 parts:

 

1) On what date was it agreed that the OFT and banks would take a test case? Was the FSA involved in those discussions?

 

2) On what date was it agreed that the FSA would introduce a waiver?

 

3) On what date was your report entitled 'FSA grants waiver on complaints handling' agreed for publication' ?

 

4) On what date was it decided to publish the said report on 27 July?

 

5) Please provide the advice supplied to senior management in regard to the date of publication.

 

6) Please supply all correpondence (either letter or e-mail) between the OFT and the FSA between January 2007 and 27 July 2007 in relation to bank charges.

 

I look forward to a substantive response within 20 working days. I have considered this request carefully, checking each request against the exemptions in the Freedom of Information Act 2000, and if you fail to provide the information requested then I will ask for an internal review. If I am unsatisfied with that response then I will make a complaint to the Information Commissioner and ask him to make a Decision Notice requiring the FSA to release the information. Having analysed previous Decision Notices, I am more than confident that the Information Commissioner would require ALL this information to be released.

[crfx250]

...and I wonder how they will cope with paying out everyone automatically who have had charges taken once they lose this case - which they will.

 

 

If the OFT wins the case I can't see what mechanism exists that would

automatically refund past charges. I'm sure the courts don't have the

power to order blanket refunds and nor do the regulators.

 

Below is a transcript of a Paul Lewis interview with our old chum, the FSA's Clive Briualt:

 

 

 

++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++

 

 

 

MONEY BOX

 

Presenter: PAUL LEWIS

 

 

TRANSMISSION: 27th JANUARY 2007 12.00-

12.30pm RADIO 4

 

 

 

LEWIS: Hello. In today’s programme, millions of

homeowners could recover £100 or more each from their mortgage

lender after the regulator says some charges are unfair. The European

Court of Justice says that a government pension compensation scheme

is not good enough, but will it be improved? Bob Howard’s here with

the latest on claiming back bank charges.

 

HOWARD: Are judges losing patience with banks

who don’t seem to want their day in court?

 

WOMAN: The judge is finally standing up to the

banks and the banks’ solicitors and saying come on, stop wasting our

time.

 

LEWIS: And should you link your gas and

electricity bills to the wholesale price of fuel?

 

But first, millions of homeowners could get a refund from their

mortgage lender after yet another ruling that the financial services

industry has been treating its customers unfairly. This time, the

regulator has told banks and building societies that the fees they charge

people to leave a mortgage deal – so called exit fees – have been

unfairly increased after the mortgage began. Ten years ago exit fees

averaged less than £60. Today, they’re more than £200, forcing

borrowers to pay a much higher fee than they were told about when

they took out the loan. Money Box revealed that the Financial Services

Authority was investigating these charges more than a year ago and last

summer mortgage adviser Danny Lovey told us why he felt the

regulator had to act.

 

LOVEY: They’re a scandal and people like me are

embarrassed and very irritated when lenders are putting charges up.

What we want to do really is to keep the lenders honest and transparent.

When they move the goalposts when the client is actually in the middle

of a mortgage deal or towards the end of a mortgage deal, they have the

consumer over a barrel and I just think it’s wrong.

 

LEWIS: Well 6 months on, the FSA has taken

action. Clive Briault is its Head of Retail Markets.

 

BRIAULT: We’ve told lenders that if over the last

few years they have increased these exit fees by a substantial amount,

then they have to decide whether to reduce the fee back to what it was

originally when the consumer took out the mortgage or alternatively

justify any increase that they’ve imposed. And we believe this will be

of benefit to millions of consumers because in the vast majority of cases

what the lenders will do is bring the fee back to its original level.

 

LEWIS: What about new customers though?

Does it do anything for them or can a mortgage lender fix the fee at

£500 or £1,000 as long as they then stick to that when the mortgage

comes to an end?

 

BRIAULT: They have to be absolutely clear about

what their fees are and the basis on which any changes during the life of

a contract could be made.

 

LEWIS: But it doesn’t have to reflect the actual

cost?

 

BRIAULT: It doesn’t, no.

 

LEWIS: But what about the 6 million or so people

who have already remortgaged in the last 5 years, paid those fees.

What should they do?

 

BRIAULT: Well if those people have paid an exit fee

which they thought was unfairly high because they paid a fee which

was substantially higher than the fee that they thought they would have

to pay when they entered into the mortgage, they should complain to

their former lender.

 

LEWIS: And they should get the difference back?

 

BRIAULT: Well unless the lender can justify a

reason for the increase, then they should get the difference back, yes.

 

LEWIS: And are you telling lenders to find these

people or are they going to have to make a claim?

 

BRIAULT: We’re not telling lenders that they have to

undertake a review of all of their past business.

 

LEWIS: But they must have the records. Why

not?

 

BRIAULT: We don’t have the powers under the

unfair contract terms to instigate a past business review.

LEWIS: Did you ask them? Did you suggest to

them they might do this as part of your negotiations?

 

BRIAULT: Well clearly, yes we did discuss that with

them …

 

LEWIS: And they said no?

 

BRIAULT: … in terms of whether the industry would

be prepared to do that on a voluntary basis …

 

LEWIS: And they said no?

 

BRIAULT: … and for something which would cover

the whole of the industry.

 

LEWIS: They said no?

 

BRIAULT: Well they certainly didn’t say yes

immediately and I think had we tried to engineer and broke such a

solution, we would have ended up not benefiting millions of consumers

now that probably are entering into a very protracted negotiation which

could have gone on for a long time.

[crfx250]

----- Original Message -----

From: Independent Complaints Scheme FSA

To: crfx

Sent: Friday, August 31, 2007 4:49 PM

Subject: RE: Your complaint against the FSA

 

 

 

Dear crfx

With reference to your emailed response of 29 August 2007 to our email of the same date, we note your comments. I can confirm that our assessment of allegation one of your complaint is that you are dissatisfied with the CCC's responses to your enquiries relating to the FSA's decision in principle to grant firms, who apply for it, a waiver from the time limits contained in the FSA's complaints-handling rules in relation to unauthorised overdraft charges. We will investigate all retrievable copies of communications between you and the CCC, in this respect, which would include recordings of telephone calls.

In explaining that we were unable to investigate complaints relating to the actual waiver, we were not attempting to classify your initial enquiry to the CCC as a complaint (in fact, in our email of 29 August, we state: "we note that your original enquiry to the CCC..."), but were just trying to explain what matters we can (and cannot) investigate under the Complaints Scheme in an attempt to manage your expectations. Therefore, to reaffirm, we can and will investigate your complaint relating to the CCC both in relation to allegation one and allegation two (the assessment of which you do not appear to dispute).

With regards to the information you submitted to Clive Briault's office on 24 August 2007, it is standard procedure for correspondence from consumers/non-regulated firms to be passed to the CCC for reply. However, as the CCC was aware that you had raised a complaint with us, it felt it appropriate that we acknowledge receipt of this further information.

We will next contact you on or before 19 September 2007 with an update, which will hopefully constitute our substantive response to your complaint.

Yours sincerely

______________________________

Craig Drury

Complaints Team

Company Secretariat

The Financial Services Authority

http://www.fsa.gov.uk/Pages/About/complaints

 

 

Original Message -----

From: crfx

To: Independent Complaints Scheme

Sent: Friday, August 31, 2007 6:53 PM

Subject: Re: Your complaint against the FSA

 

Thank you for your e-mail of 31 August.

 

With regard to allegation one I note that you concede that my original

inquiry to CCC was not a complaint and this therefore renders your unprompted explanation as to your complaints criteria irrelevant.

 

Your thoughtful attempts to ''manage'' my expectations are really not necessary despite - and judging by the FSA's consistently woeful performance as a financial regulator - your expectation management skills are, I'm sure, of the highest order.

 

 

 

Further Complaint

 

Your ref: FO10737

 

I now need to make a further complaint with regard to the FSA's

failure to respond to my FoIA request within the 20 working day

limit.

 

The FSA is now in breach of the Freedom of Information Act 2000.

 

The Information Access Dept claims to have sent a response by

e-mail twice today but this is not the case.

 

crfx

[crfx250]

Interesting - what info are you requesting under the FoIA?

 

 

It's on the FSA FoIA thread here

 

http://www.consumeractiongroup.co.uk/forum/general/109188-fsa-foia-request.html

 

And I have received and posted the response

[crfx250]

The FSA is a 'public authority' and even though it's funded by the industry

it is answerable to the Treasury.

 

It's just as full a member of the Freedom of Information scheme as any other and it has to abide by the same FoIA rules as any other public body

 

Freedom of information

[crfx250]

Cool- have a listen to Moneybox on Radio 4 on now, they are discussing the waiver.

 

BBC NEWS | Programmes | Moneybox

 

 

Thanks Noom!

[crfx250]

He He. Don't you worry, she'll get her come uppence before long.

[crfx250]

What kills me is this part of the quote ''If we do our own financial analysis...'' What does he mean ''if''? They've been conducting a major investigation into these charges for a year and are on the verge of challenging these charges in court.

 

If the OFT is ever to rule on the fairness of these charges, whether they apply to UTCCR or not, they cannot do this without a financial analysis.

 

So the question begs - why on earth have these people not done this already?

[crfx250]

Martin Lewis is to meet with the OFT this week to discuss the current bank charges situation.

 

Hopefully we'll get clarification on a number of issues.

[crfx250]

I thought the OFT's response was very informative myself. Interesting that the consumer panel of the OFT will be consulted in the waiver review and not just the legal dept

[crfx250]

This letter is from OFT to an MP in response to a letter written on behalf of a constituant.

 

The most notable paragraph Iv'e highlighted in bold.

 

 

 

 

Thank you for your letter dated 28 august enclosing an email from your constituent, xxxxxx ,about the OFT test case.

 

By way of background, there has been widespread concern as to whether or not the personal current account market in the UK is competitive. There have also been specific concerns about the legality of charges relating to unauthorised overdrafts and returned item fees. Following an initial fact finding investigation, the OFT launched , in April , a market study into the personal current account market. This is designed to provide the OFT with an understanding of how well the market as a whole works for consumers. The OFT's view is that active informed consumers are the best drivers of efficient competitive markets so the study is focused particularly on transparency of costs to consumers, ease of switching and fairness of the pricing structure. The study is due to report in December.

 

In parrallel with the market study , the OFT is examining the "fairness" of the level of personal current account unauthorised overdraft charges and returned item fees under the unfair terms in consumer contracts regulations ( UTCCR's). The market study will help us to fully understand what impact any enforcement action taken by the OFT may have on the personal current account market.

 

One aspect of that investigation is considering whether the "unfairness test " contained within the UTCCRs applies to the charges. The OFT considers that the test applies, but the banks disagree. We believe that an early ruling on this point of principle will assist in securing a clear and orderly resolution to the fairness of these charges. We have therefore commenced proceedings in the high court for a declaration on the application of the law. An expedited hearing has been set for January 2008.

 

It is possible that we might in due course expand the scope of the proceedings to include a claim for an injunction to stop certain amounts being charged, if necessary and appropriate in light of our UTCCRs investigation.

 

Your constituent is concerned that consumer complaints about unauthorised overdraft charges are being suspended pending the outcome of the test case,but banks are continuing to levy charges.His own claim for almost £5000 against the Co-operative bank has been suspended,however he continues to be charged monthly interest on the charges. His letter raises the important issue of the impact of unauthorised overdraft charges and returned item fees on consumers with low income. While the OFT's remit does not include social policy issues, our market study into personal current accounts will examine the economic impact of "free if in credit " current accounts and will examine the potential impact of any charges in this charging structure on consumers, including on financial inclusions.

 

Prior to the test case , the scale of consumer litigation for the return of bank charges was resulting in conflicting outcomes and significant costs to individual consumers. By bringing this action on behalf of the consumer we will gain the legal clarity necessary to achieve the fair and consistent handling of consumer complaints and, through the agreement with the banks and the FSA we are committed to ensuring this process is resolved in as efficient and expeditious a manner as possible.

 

As we have not yet completed our investigation into the fairness of the current levels of charges , it would not be appropriate for us to ask the banks to make changes to their charging structure at this time. Further , we have not yet completed our market study assessment of the potential impact of such changes. However , we have been working closely with FSA and FOS , who hold complaint handling responsibilities for the banking industry, to ensure that the test case process is as well co-ordinated as possible and that consumers will not be disadvantaged.

 

The test case does not mean that consumers are too late to complain. But until the outcome of this legal action is known, the FSA has allowed banks to suspend their work on complaints about the charges. Because the legal issues have not yet been determined , the FSA has not intervened in the levying of the charges , however it has set strict conditions that banks must follow , designed to ensure consumers ability to recoup charges levied prior to or during the test case , will be unaffected.

 

Firms with the waiver must : not take the period,during which the waiver is in place, into consideration in any decisions made about limitation periods or time limits for complaints

 

: Not make materially adverse changes to the level of charges during the waiver;

 

: So all they can to help account holders avoid incurring these charges in the first place;

 

: Apply the relevant principles established in the test case when dealing with complaints about charges :and

 

: Continue to deal with genuine hardship cases during the waiver period.

 

Your constituent is also concerned that the OFT did not consult bank charge action groups before taking this action. We have consulted with consumer representative bodies like Which? the NCC and the CAB in connection with our investigation into bank charges. And , we met with Which ? and other consumer bodies just prior to announcing the test case, to inform them about it. We have also welcomed evidence and submissions from other interested parties , including bank charge groups, relevant to the market study and current proceedings. We are committed to communicating with consumer advisory groups throughout the process and have agreed to keep those bank charge groups with whom we have corresponded updated at key stages. This includes the groups mentioned by your constituent in his email.

 

i hope this information is helpful

 

yours sincerely

 

John Fingleton

Chief Executive

Office of Fair Trading

[crfx250]

They are due to give me a decision on the release of the balance of the OFT/FSA correspondence by this friday once a board member decides on the balance of public interest issue. But with my threat of legal action and complaint about the honesty of 2 FSA staff I'm not holding my breath

 

Here's the correspondence to date - the last of which is the pdf attatched

Our ref: FOI0737

 

 

Dear Mr crfx

I refer to your request for information which was received on 2 August 2007, under the Freedom of Information Act 2000 ("the Act"), for the following information:

"1) On what date was it agreed that the OFT and banks would take a test case? Was the FSA involved in those discussions?
2) On what date was it agreed that the FSA would introduce a waiver?
3) On what date was your report entitled 'FSA grants waiver on complaints handling' agreed for publication'?
4) On what date was it decided to publish the said report on 27 July?
5) Please provide the advice supplied to senior management in regard to the date of publication.
6) Please supply all correpondence [sic] (either letter or e-mail) between the OFT and the FSA between January 2007 and 27 July 2007 in relation to bank charges."

Points 1) to 4) of your request are being taken forward as business as usual and not under the Act. The responses to these questions are as follows:

1) On what date was it agreed that the OFT and banks would take a test case? Was the FSA involved in those discussions?

The FSA was involved in the discussions, but the OFT and the Banks made the decision to take a test case.
The Agreement (which included the introduction of the waiver) became effective once the FSA signed it on 26 July.
Below is a link to the Agreement which is displayed on the OFT's website
http://www.oft.gov.uk/shared_oft/press_release_attachments/bankagreement.pdf

2) On what date was it agreed that the FSA would introduce a waiver?

The FSA, by a decision taken by its Retail Regulatory Committee ("RRC") on 18 July, decided to make a waiver of the FSA complaints handling rules available to a number of banks and building societies that provide account services with overdraft facilities. The RRC decision to grant the waiver received FSA Board approval on 26 July.

3) On what date was your report entitled 'FSA grants waiver on complaints handling' agreed for publication?

The press release entitled 'FSA grants waiver on complaints handling' was agreed for publication on the 26 July.

4) On what date was it decided to publish the said report on 27 July?

Our press release was issued to the media on 26 July and was posted on our website on 27 July.
The decision to publish our press release on 26 July was made on 26 July, following approval by the FSA Board to grant the waiver.
 

Questions 5) and 6) of your request are being taken forward under the Act.

5) Please provide the advice supplied to senior management in regard to the date of publication.

I can confirm that we do not hold the information you have requested.

6) Please supply all correspondence (either letter or e-mail) between the OFT and the FSA between January 2007 and 27 July 2007 in relation to bank charges.

With regard to the information we do hold, we are not able to disclose it to you because the following absolute exemptions apply:

• Section 21 (Information accessible to you by other means)
   
  To the extent that we do hold publicly available information, we are not required to release this under the Section 21 exemption as it is information accessible to you by other means. Some of the information is available on the FSA website:
  

Deloitte Cost of Regulation Report

http://www.fsa.gov.uk/pubs/other/deloitte_cost_of_regulation_report.pdf

The other publicly available information that we have you can obtain from:

BBC (Lloyds TSB court case re overdraft penalty charges)

http://news.bbc.co.uk/1/hi/business/6657025.stm

Birmingham Post

http://icbirmingham.icnetwork.co.uk/birminghampost/business/tm_method=full%26objectid=19254183%26siteid=50002-name_page.html

Financial Times

http://search.ft.com/iab?queryText=overdraft%20charges&y=6&aje=true&x=12&id=070710000645&location=http%3A%2F%2Fsearch.ft.com%2FftArticle%3FqueryText%3Doverdraft+charges%26y%3D6%26aje%3Dtrue%26x%3D12%26id%3D070710000645&referer=http%3A%2F%2Fsearch.ft.com%2Fsearch%3FqueryText%3Doverdraft+charges

HM Courts Service

http://www.hmcourts-service.gov.uk/cms/1440.htm

Office of Fair Trading

http://www.oft.gov.uk/news/press/2007/106-07

The Financial Ombudsman Service

http://www.financial-ombudsman.org.uk/news/updates/bank-charges-26-07-07.html

• Section 44 (Prohibitions on disclosure)
   
  Section 44 provides that information is absolutely exempt if its disclosure (otherwise than under the Act) is prohibited by or under any enactment. Section 348 of FSMA restricts the FSA from disclosing "confidential information" it has received except in certain limited circumstances (not one of which apply here).
  Confidential information for these purposes is defined as information which relates to the business or other affairs of any person and was received by the FSA for the purposes of or in the discharge of its functions under FSMA which is not in the public domain.
  Disclosure of confidential information in breach of section 348 is a criminal offence.
  Consequently we are prohibited from disclosing to you any information that we have received which is not in the public domain.
  

In addition, I am writing to advise you that we consider that the information may also be exempt under the following qualified exemptions:

• Section 31 (Law enforcement)
  
• Section 36 (Prejudice to effective conduct of public affairs)
  
• Section 42 (Legal professional privilege)
   
  

Section 31 of the Act will apply if the exercise by any public authority of its functions for any of the purposes specified in subsection (2), among others, the public body holding the information might be harmed by its public disclosure.

Section 36 of the Act will apply where disclosure of the information would be likely to prejudice the effective conduct of our public affairs.

Section 42 of the Act will apply where the information is subject to legal professional privilege.

The above three exemptions are qualified exemptions and the FSA is required to weigh the public interest in maintaining the exemptions against the public interest in disclosing the information. By virtue of section 10(3) of the Act, where public authorities have to consider the balance of the public interest in relation to a request, they do not have to comply with the request until such time as is reasonable in the circumstances. The FSA has not yet reached a decision on the balance of the public interest. Due to the need to consider, in all the circumstances of the case, where the balance of the public interest lies in relation to the information that you have requested, the FSA will not be able to respond to your request in full within 20 working days. In these circumstances, we should be in a position to respond to your request by 28 September 2007. If you do not receive my response or further information by then, please contact me and I will investigate the matter.

Yours sincerely

Shelley Spies (Mrs)

Information Access Team

 

 

*****************************************************************

If you have received this email in error please notify [email protected] immediately and delete the email from your computer. This email is not intended to nor should it be taken to create any legal relations or contractual relationships. This email has originated from:

The Financial Services Authority (FSA)

25 The North Colonnade,

Canary Wharf,

London

E14 5HS

United Kingdom

+++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++

----- Original Message ----- From: crfx

To: Freedom of Information

Sent: Monday, September 03, 2007 6:19 PM

Subject: FOI0737

 

 

 

Dear Mrs Spies

Thank you for your e-mail of 31 August.

I would be grateful if you would clarify the status of question 6 in your response.

You quote absolute exemptions s21 and s44 apply and then go on to say s31, 36 and 42 (qualified exemptions) may apply pending consideration of the balance of public interest. Would I be correct in assuming that s21 and s44 apply to some of the information requested and s31, 36 and 42 may apply to the balance? And if this is the case, why have you specifically chosen 28 September - the day after the waiver review - to respond?

As I am sure you are aware, section 36 can only be invoked if it holds in the view of a ''reasonable person'', which the DCA's guidance indicates is usually a minister. As the FSA is a non-ministerial department I assume you will seek the view of the Chairman or the Chief Executive. Will you?

With regard to the 3 qualified exemptions that may be invoked dependent on a decision on the balance of public interest issue, I am aware that dozens of Members of Parliament have now written to the FSA and OFT on behalf of their constituents questioning the reasons for and fairness of the waiver. I would suggest that the information I seek is overwhelmingly in the public interest and would be very difficult for the FSA to argue otherwise.

I look forward to your prompt response.

Your sincerely

crfx

FOI0737 Query response requester 20070913.pdf

[crfx250]

Did you read the Daily Mail today (MONEY MAIL) the did a piece on Hardship cases and said that the banks are in breach of the waiver and that anyone concerned should complain to the FOS. Not sure exactly what they will do but it is worth a try!

DS

 

I'd be interested in reading that but can't find the artical on their site.

 

Was it definately today?

[crfx250]

It's here

 

Banks flout rules on hardship cases | This is Money

 

Thank you midge!