Bank Charges - illegal?

dchurch24

Consumer website https://www.bankchargeshell.co.uk has warned Britain's high street banks that they will face a tough year ahead as an increasing number of customers challenge them in court over the illegal penalty charges that they routinely impose upon millions of their customers.

When a credit card customer misses the specified date for making a payment, the card company automatically imposes a penalty, typically £20-30. When a current account customer breaches his/her overdraft limit and the bank returns a cheque or direct debit, or allows the customer to have an unauthorised overdraft, the bank imposes a penalty in the range of £20-35, frequently with further daily or monthly penalties and excessive rates of interest. Under common law, these charges can only be enforced if they represent a reasonable estimate of the loss that the bank has incurred as a result of the customer's breach of contract. Since the loss incurred by the bank is merely the administrative cost of notifying the customer, the charge made is clearly far greater than a reasonable estimate of their loss and would not be enforced in a court.

The Consumer Association has estimated that Britain's banks make £3 billion per annum through these charges.

In 2005, bankchargeshell.co.uk was set up to inform consumers of their rights. During the past year many bank customers have made county court claims against their banks for recovery of these charges. All of Britain's major banks have paid up rather than fight a case in court. Barclays, NatWest, HSBC, Lloyds TSB, Abbey, Alliance & Leicester, Halifax, Yorkshire Bank, Co-operative Bank are among those who have surrendered in the face of claims.

At the same time, the Office of Fair Trading, is investigating the specific issue of default charges on credit cards under its duty laid down in the Unfair Terms in Consumer Contracts Regulations 1999 and it is expected that it will make a ruling shortly. (The deadline for the banks' responses to the initial findings passed on 26 October 2005.)

Bankchargeshell.co.uk spokesman, Dave Smith, said, "It is clear that the banks are running scared. They have suffered a series of humiliating climbdowns against the members of our group during 2005. They will face more of the same in 2006. They also know that they face almost certain defeat in the OFT investigation and that the OFT will move on to the issue of current accounts in 2006. We have written to the chief executives of Britain's major banks asking them to voluntarily refund their customers these illegal charges and to change their standard terms. We have also warned them that they could face the criminal charge of deception if they continue to offer their customers what the banks' officers know are legally flawed contracts."

They also mentioned my case against Abbey where all the money was given back plus charges et al.

There was also a quote from Sandra Quinn of APACS, stating that the charges were a deterrent - I'm going to email her to thank her for that one!!

dchurch24

Incidentily, to bring this thread back on track some more:

Under the 1977 Unfair Terms (contracts) Act - terms agreed to in a 'common' contract (i.e one in which the consumer would not have sat and agreed terms at the time of writing of the contract) have to be reasonable.

The act states what 'reasonable' is and quotes several examples:

(b) whether the customer received an inducement to agree to the term, or in accepting it had an opportunity of entering into a similar contract with other persons, but without having to accept a similar term;

ALL banks make these charges, so therefore the contract does not meet the "reasonableness" test.

also:

(5) It is for those claiming that a contract term or notice satisfies the requirement of reasonableness to show that it does.

Banks typical response is to claim that the charges are not punitive in nature and are in their T&C's. Not once have I been offered any documentation (despite requests) to back up their claim (which they are legally bound to do).

So, to anyone considering legal action - it may well be worth finding the act and having a read yourself.

dchurch24

The fact of the matter here is that although this thread sometime sietracks a little, but it is about the fees that are charged being fair. That is all it is about. It's not even about whether you could have avoided the situation first, just fair fees.

Quite right too. A few pages back, someone said that they were sad that it always came down to this argument with me.
What's that? The argument about the legalities of bank charges, in a thread called 'Bank Charges - Illegal?' - imagine that!!!

inmypocketnottheirs

Dchurch, what was the date of the article, I would like to get hold of it to fax to my bank!

YorkshireBoy

inmypocketnottheirs wrote:

Dchurch, what was the date of the article, I would like to get hold of it to fax to my bank!

See post #239

inmypocketnottheirs

YorkshireBoy wrote:

See post #239

Sorry, just me being a nugget!

ajbaker

For dchurch24:

throughout this thread you have been referring to the Unfair Terms (contracts) Act. Whilst not doubting what you have said, and being extremely grateful, I wanted to read the facts myself.

In my search I have found the 'Unfair Terms in Consumer Contracts Regulations 1999':
http://www.opsi.gov.uk/si/si1999/19992083.htm

This would appear to be the legislation you are referring to. In addition there is legislation from 1977 that is current, however this refers to Unfair Contract Exclusions.

The current legislation includes the term "(e) requiring any consumer who fails to fulfil his obligation to pay a disproportionately high sum in compensation" as an example of a contract that is considered unfair. However it does not make reference to the business being required to show that the term is reasonable.

Murky territory. I do not doubt I have misunderstood your comments. Perhpas you might point us in the direction of the legislative documents...

Thanks.

dchurch24

Primarily the 1977 act does refer to exclusions, but not exclusively. It also sets out what is regarded as 'reasonable' in a contract. Not just reasonable to exclude.

There is also the 1999 CCR which you mention, although it is my understanding that it is only the OFT that can bring prosecution using it.

My argument remains that case law dating back to 1896 proves that punitive measures in contracts will not be upheld by a court of law in England or Scotland. I have not, as yet, fought on any other grounds. The arguments and quotes from the acts I have mentioned are there purely to back the argument that the charges are not legally enforcable.

I will provide links to the 1977 act when I get back to my home PC (I am at a friends house at the moment and do not have the same bookmarked pages here!).

Fedz

After much self debating and reading dchurch24 posts regarding bank charges being unfair in law as these in effect can be seen as a profit from a breach of contract.

I faxed Lloyds TSB regarding my past bank charges that total £260.

As expect Lloyds dragged their feet for a few weeks with no repsonse until I called them to bring my fax to their attention.

They then replied within a few days upon which was a refusal - as I did expect from them.

I then faxed again giving notice of legal action proceeding and a copy of my original fax for reference.

I then called the day after this to have a 'chat' with the area assistant manager to bring his attention to the law.

During this converstaion I agreed to compromise with a goodwill gesture of £130 from Lloyds.

I was prepared to goto court over this but, quickly figured for the sake of £130 more I'd have to fill in a N1 at County Court and do some leg-work to gain the difference.

In a nutshell I couldn't be bothered to fill in the N1 and do some leg-work as I was perfectly happy to accept £130 (half the amount) for just faxing twice and talking for 10 mins.

Good outcome and one I owe a massive thanks to dchurch24.

I work within the NHS, so have also passed all my leaned knowledge to other members of staff who are in the process of doing similar to the above - well done dchurch24

dosser_2

dchurch,

if a contract is judged to contain unfair terms i.e penalty charges, does that make the entire contract unenforceable?
is this the reason finance companies sell debt to a collection agency?

dosser

ps keep up the good work!