OFT may compromise on bank fees

[SL56]

From a news article on bbc BBC NEWS | Business | OFT may compromise on bank fees

 

The Office of Fair Trading (OFT) could drop next year's High Court test case over bank overdraft charges, a senior official has said.

 

No news on who the official is though - seems like a sneaky move by the banks again...........

[alecmac18]

Ahhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhhh - I Knew it.

 

So - when do claim payouts restart?

[nicsussex]

No news on who the official is though - seems like a sneaky move by the banks again...........

 

But a senior official, Cavendish Elithorne, made it clear that the OFT was open to negotiation on the issue.

[alecmac18]

My bet: On Sept 30th we're going to hear something that changes this game:

 

http://www.consumeractiongroup.co.uk/forum/campaign/113025-open-letter-fsa.html

 

http://www.consumeractiongroup.co.uk/forum/general/113285-banks-oft-rock-hard.html

[einyuk]

this does not surprise me in the slightest............the same as before one big delaying tactic, breathing space while they come up with something.......i've said it once or twice an i'll say it again........i can not ever see this going to court.......

[Giveitback]

This is the part that bothers me though...

 

Intriguingly, the OFT revealed that it actually agrees with part of the banks' arguments.

 

 

They claim that their charges are not penalties, but are fees for a service - for running a current account while it is in the red.

 

"In most instances we would probably agree with the banks' arguments that these are not penalties as defined in common law," said Mr Elithorne. But he insisted that the OFT Still believes the charges are unfair - even if they are "fees for a service".

[einyuk]

well that's funny cause in abbey's defence to my court claim they state that these charges are for a breach of contract...............and now they become fees for a service?

 

how can they revamp their conditions an get away with that in court?

[tifo]

so if the OFT agree that the banks' charge is a 'service fee' then we, the consumer, have lost and we will get nothing back?

 

what about common law and penalties etc?

[midge61]

They are going to do what they did with CC and then we go back to challenging in the courts and nothing changes. Just shows what a bunch of spinless wassocks they are.

 

I bet this is what the waiver was for to give the banks time to come up with a compromise and too avoid the court hearing altogether!

[SL56]

But a senior official, Cavendish Elithorne, made it clear that the OFT was open to negotiation on the issue.

 

 

Yes I knew that - what I did mean was what his position within the organisation was (other than a senior official.....) because to me this could possibly be unofficiated comment?

 

There doesnt appear to be a news release anywhere from the OFT

[nicsussex]

have a look on this thread and you will find out who he is

 

http://www.consumeractiongroup.co.uk/forum/bank-charges-media/113807-oft-may-agree-deal.html

[Deso]

this again, stinks. How can they get away with this? are there any consumer rights in this country anymore?????

[bruce47]

This doesnt seem like good news

 

The banks say "The eight banks challenging the OFT say it has no jurisdiction in the matter"

 

This shows they do not want to compromise they want to draw out a long winded court case.

 

"However, if and when, the judge will not be asked to rule on whether bank charges are legal or fair.

 

 

 

Instead the judge will have to decide whether the OFT has the authority to decide the issue itself, under the Unfair Terms in Consumer Contract Regulations."

 

This is also crazy whats the point of the test case if it isn't to find out if the charges are legal or not. What is the point of the waiver??? i thought it was to see if the charges are legal or not that is what the OFT have been saying.

 

Does the POC's say this that it is just to see if the OFT can challenge them or to see if they are legal or not?

 

MAIN QUESTION

 

If they do withdraw from the test case because the banks lower there charges what happens to all the ongoing and future claims. will they still be able to get refunds??

[livelylad]

MAIN QUESTION

 

If they do withdraw from the test case because the banks lower there charges what happens to all the ongoing and future claims. will they still be able to get refunds??

 

Yes, the issue of the amount they charge will still need to be decided. Should the OFT make a deal it will just be the same situation as with Credit cards.

[alecmac18]

"When the ducks are quacking - feed them"

 

Without a dobut you will now hear the following statement on Sept 30th.

 

PRESS RELEASE (OFT & FSA)

 

"Over the last two months it has become apparent that the issues involved in determining the level and fairness of bank charges are broad and wide ranging. Questions have also arisen as to where responsibility lies with regards to enforcement. The FSA and the OFT recognise that these issues may take some time to bring to a conclusion. We do not think that it is in the best interests of customers for this situation to continue in its current form. Therefore the FSA is today lifting the wavier that allows banks to stop dealing with bank charge complaints. The OFT & the FSA have agreed that customers who wish to pursue a claim immediately may do so. While the High Court Test case will continue, it is likely to be delayed for some time."

 

Customers who wish to pursue their claim may do so under the following conditions:

 

1. The FSA recommends that banks are able to refund the difference between £12 and the charge levied (as per original OFT ruleing).

 

2. The payments will be in 'full and final settlement' of any high court case.

 

3. The banks will be given extra time to process these payments.

 

4. There will be a cut off point (likely 2 years) for these claims to be settled.

 

5. Cases in court will be be given offers to settle as above.

 

6. The FOS will process complaints in line with Directions given above.

 

 

EDIT: Claims will still not be automatic. I reckon a list of charges will still have to be submitted to the bank in order to get a claim. In other words, some kind of effort will still have to be made by claimants. The banks will not simply credit accounts without a claim being submitted.

 

 

In the meantime the FSA and OFT will set up a working group to decide who has the responsibility for regulating charges in the UK banking market. This will last some time & the FSA eventually win.

 

The Economics behind the decision:

 

There is a saying "when the ducks are quacking - feed them". This is what they will now try and do. You see, Charges commission complaints (as they are known) have all the hallmarks of a bank run. Except in this case no one has any money. However the consequences are the same. If the issue is left to fester then confidence is in danger of slipping. And we can't have that. No siree bob. Banks have paid out 2.6 billion so far in charges and there is another 4-6 billion or so to go. Not much at all when divided by 8-10 banks or so and spread over 2 years. The best part is it will cost them nothing. At the end of the year they will apply to HM for a tax rebate. They will then be sent a cheque. It is the British way. Bernake has helicopters. We have the FSA and HM Customs and Revenue. Much quieter really.

 

The problem is really one of competition and the FSA and OFT know this. The FSA will (while all this is happening) slowly start to regulate bank charges to death. They cant really ban them (without great difficulty), and they cant rely on any banks to break ranks to stop charging them. Instead they will require rules that become steadily more onerous as time passes until the cost and effort of complying with FSA directives outweighs the benefits. I reckon this will take 2 years. Just enough time to settle 99.98% of all complaints. Then - with the regulating of bank charges complete, any talk of OFT court action will fall away.

 

As an added side benefit it will also give the boys from the FSA some nice consulting jobs to go to when the new FSA rules regarding bank penalty charges are brought in.

 

You see. That's just how its done. Its in the FSA playbook. Its been done before (endowments). And dont forget the regulation that followed. (have you seen a mortgage or life insurance application recently?)

 

I'm not saying the above senario is the right one for claimants, but will it happen?

 

Not long to wait and see.

[alecmac18]

For future bank charges applied to accounts (after sept 30th)

 

1. Likely that an emergency level of £12 (max) will be placed on them.

 

2. Banks will have to offer customers a 'basic' bank account that has a solo or electron card and cannot go overdrawn under any circumstances. They will be directed to indentify customers who would suit this kind of account and swich them over proactively. Customers may ask to be switched to this kind of account.

 

3. It will be ordered that communications with customers must be much more proactive in order to stop high levels of charges being incured.

[k65]

i intend to use this in my evidence for a removal of stay, as the certanty of the test case is now unsure. how do others feel

[alecmac18]

A look to the future: Its TESCO baby.

 

 

Seeing the writing on the wall you would think that most banks would like to take market share by stopping all charges on their accounts. However they will not do this. they will comply with the FSA regs on the issue to the letter.

 

However at some point customers will still be fed up of paying even £12. The problem is that when you're selling fresh air its difficult to retain customer satisfaction.

 

At some point someone (I reckon Tesco) will wade into the retail banking market and start mopping up all the customers who currently hate their bank. Their account will be good: with a clubcard, no overdraft fees AND it will pay interest. They will do well. Too well. The rest of the banks will mutter. Then they will try and follow suit. It wont work. By then we'll all be banking at TESCO.

 

The crux of the matter is that banks are currently sending customers away with an empty shopping bag that they are paying through the nose for. Tesco know that this does not fly. They would rather make lots of little bits of money from you. This will drive down margins and banks profits. Tesco will become Britains biggest bank. The bank execs will wonder at what point they went wrong.

 

Banks: You've seen the writing on the wall. Don't say you had no warning. This will be seen in the future as a crucial fork in the road.

[k65]

For future bank charges (after sept 30th)

 

1. Likely that an emergency level of £12 (max) will be placed on them.

 

2. Banks will have to offer customers a 'basic' bank account that has a solo or electron card and cannot go overdrawn under any circumstances. They will be directed to indentify customers who would suit this kind of account and swich them over proactively. Customers may ask to be switched to this kind of account.

 

3. It will be ordered that communications with customers must be much more proactive in order to stop high levels of charges being incured.

 

so all cases before this date should be paid at the rate applicable at that time

[alecmac18]

Who knows? Its just a guess. But I reckon payouts of charge amounts over and above £12 (e.g £35 - £12 = £23) going back 6 years with no interest will be paid out.

[alecmac18]

But wait I hear you say: What about the courts?

 

Well: The banks will initially give you a choice a settling or waiting for the High Court Test Case (which will never, ever happen). Those who choose to settle will be cleared out of court. Those who choose to wait will find the case being dropped late next year by an outgoing FSA exec (after the FSA wins control of the fight). Remaining cases will be quietly settled in full.

 

Some clever people may still be able to wring full settlements out of the banks by using exotic legal agruments. Banks will simply instruct their lawyers to continue playing the litigation game - ultimately they will pay these in full. However the majority will be settled as above.

 

You gotta love it. So - whats the next scandal. I think we'll be back to mortgages soon. lol

[einyuk]

i dunno cause 6yrs ago charges were £10 so how that gonna work?..........just scrub them from my claim?

[PhantomReclaimer]

This is the part that bothers me though...

 

Intriguingly, the OFT revealed that it actually agrees with part of the banks' arguments.

 

 

They claim that their charges are not penalties, but are fees for a service - for running a current account while it is in the red.

 

"In most instances we would probably agree with the banks' arguments that these are not penalties as defined in common law," said Mr Elithorne. But he insisted that the OFT Still believes the charges are unfair - even if they are "fees for a service".

 

This is just so much horse****, from both the banks and the OFT!

 

For years and years the banks made no suggestion what so ever that these charges represent a fee for a service. Every letter Northern Rock ever sent me regarding charges said I was being charged "in order to cover our costs". Moreover, the charge simply cannot be one for a service because there isn't any service that is being provided that is capeable of accurate definition. Returning a DD is not a service, it's the refusal of a requested service, you wouldn't go into a pub and expect to be charged £30 for the "service" of being told the John Smiths had run out! An overdraft is provided with interest being payable for the service of lending you money.

 

Going overdrawn, or exceeding your overdraft limit, without permission is specifically prohibited by your T's&C's, therefore you are in breach of your banking contract. For one party to argue that the effect resulting from a breach of contract by the other party amounts to the provision of a service by the inocent party is ludicrous in the extreme. You are, in effect, saying that a course of action which you have jointly and specifically decided to make sure does not happen somehow becomes acceptable and chargeable.

 

If this is genuinely a service that is being provided to the account holder then he is entitled to have it's precise nature defined for him and under what circumstances it will, or will not, be provided. He would need to know this as there is a duty of care when providing any service that it is provided with reasonable dilligence and a bank would be liable to him if they negligently performed said service.

 

P.

[alecmac18]

"i dunno cause 6yrs ago charges were £10 so how that gonna work?..........just scrub them from my claim?"

 

 

Probably: They've taken their pound of flesh. There is no doubt they will give a few ounces back - but that will be it. Of course - I could have got it all wrong. But this is generally how it works. If there is any difference it will be in the timing or details. The essence will be the same - get everyone a cheque, quickly and shut them up.

[alecmac18]

PhantonReclaimer: You are totally correct. But your reasoning is also precisely why it will never reach court.

 

EDIT: Never be ALLOWED to reach court I mean.