MSE News: Bank charges fighting on: a new legal argument

natweststaffmember

Centium, can I ask what you think of the cross subsidisation arguments currently being discussed?

Centium5000

Alpine_Star wrote: »

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

MR SUMPTION:
''As I understand it, this is now substantially common ground, my learned friend having confirmed shortly before the short adjournment that the directive is concerned with imbalance within a contract as between the parties to that contract, and not with, so to speak, the structure of an industry or a bank's clientele en bloc.''

Thanks for that, great work again Alpine Star

This highlights the futility of attempting a legal challenge on the basis of the banks subsidising free-to-use accounts with these charges. Quite why this is MSE's current take on it, I'm not sure.

As you ably demonstrate in your quote, the contract is only between individual parties; therefore anything done after the contract (e.g. mass subsidy, paying massive bonuses!) isn't a matter for the courts rather for parliament as it is outside of the fairness of the contract.

Alpine_Star wrote: »

Section 5(1) of UTCCR - the part of the regulations that the Supreme Court suggested might work - basically means that as OFT cannot now assess the fairness of the charges in isolation, they may be able to assess the fairness of the balance of the whole contract, due to the charges.

I'm not sure this is quite right though. From my reading of the judgement it is the adequacy ( or excessiveness) of the charges that the OFT cannot consider, either in isolation or as a whole. This doesn't necessarily preclude assessment of fairness of a term on other grounds.

As the court ruled the charges are a core part of the payment for a package of services, they cannot be considered as separate from the overall price. The overall price cannot be assessed for fairness as that would be contrary to Reg. 6(2) of the UTCCR.

Any particular term (including those relating to charges) may still be considered for fairness, only not on the basis of price. It would have to cause a significant imbalance in the rights and obligations contrary to good faith - a concept independent of the price level.

A bank being able to decide whether or not to provide a service to a customer (e.g. pay outside of overdraft), charge them based upon the outcome of their decision, but the customer having no corresponding right to decline (or be compensated) would seem a good candidate for such imbalance. It becomes significant in the overall context of the contract when this is the term that has greatest effect on the consideration due from a particular customer.

I'm sorry if I misunderstood - you might agree with this but I've misread you.

All this is a ruling under the UTCCR - my second point in the previous post relates to competition law rather than consumer regulations.

I don't believe the ruling concerning the assessment of price has any bearing on Chapter 2 of the Competition Act. That act explicitly states unfair purchase or selling price as precursor to abuse. The difference, I believe, is that UTCCR relates to contracts made under normal (competitive) conditions whereas competition law is specifically for market abuse.

Lord Falconer will be pleased

Centium5000

natweststaffmember wrote: »

Centium, can I ask what you think of the cross subsidisation arguments currently being discussed?

Sorry, was typing my reply while you posted that otherwise I'd have acknowledged you in there

kjetilniki

QUOTE=Centium5000;27398881I'm afraid not, though it's easy an easy mistake to make.

The SC ruled that you can't challenge the charges for being excessive under the UTCCR (because of Reg. 6(2)), not that you can't challenge them on that basis under other regulations.

Chapter 2 of The Competition Act clearly states:


That's because it is an abuse of market power


I've posted about it at length elsewhere, complete with references to the law and background info:

forumsmoneysavingexpert.com/showthread.html?p=27332125

The UTCCR, Reg. 5(1) doesn't rely on price, it's about balance of rights and obligations as you noted.

Absence of a similar right for the consumer to decline a payment would normally be treated as such an imbalance. It would only be omitted in 'good faith' if the bank had good reason not to do so.

The only reason I can think a bank could argue 'good faith' for omission is practicality - the payment would have to be delayed for the customer to approve it. Given that bank payments have traditionally taken 3-5 working days to clear, I don't believe this arguement would hold water.

It appears both UTCCR 5(1) and Competition Act approaches have merit, the latter is just a better fit to what the underlying problem is IMO.[/QUOTE]

rather than just because it's in a consumer contract (which UTCCR relates to).
I agree that competition act may be a way forward. however, my response was aimed at the argument that reg 5(1) wld produce a result. I dont think so re the fact they they are charging money for unauthorised overdrafts.

in cases of overunning overdrafts I wonder if there may be scope under s140A & 140B Consumer credit act [as amended] to argue that the relationship is unfair to the debtor becos of [inter alia] the terms of the agreement agreement

Alpine_Star

Centium5000 wrote: »

This highlights the futility of attempting a legal challenge on the basis of the banks subsidising free-to-use accounts with these charges. Quite why this is MSE's current take on it, I'm not sure.

It's certainly a bit of a worry isn't it?.

The OFT have just updated their Q&As to include this:

3. What sections of the UTCCR was the case about?

The OFT has always argued that it could assess in full the fairness of unarranged overdraft terms under the fairness test set out in regulation 5 of the UTCCRs. The OFT’s current investigation on the fairness of the unarranged overdraft terms is based on whether they comply with regulation 5.

The banks argued in the test case that the terms were exempt from the fairness assessment under regulation 5 because of the exemption found in regulation 6(2) of the UTCCRs.

Today the Supreme Court ruled that unarranged overdraft charging terms were still assessable for fairness under regulation 5, but certain types of assessment are not possible. It found that the terms are exempt from certain types of assessment since they are part of the price paid in exchange for the package of banking services supplied.

However the Supreme Court stated that the OFT may be able to assess the terms for fairness under regulation 5 on a different basis.

Both the High Court and Court of Appeal had earlier ruled that unarranged overdraft charging terms could be fully assessed for fairness under regulation 5 of the UTCCR's and that the exemption in regulation 6(2) did not apply to the terms.

LesD

Come on people. When will you realise that this is all just self-serving publicity???

Why should the MILLIONS of account holders who manage their finances adequately have to cross-subsidise the FEW who run up ludicrous overdraft charges?

This is not about the odd one or two who 'slip' into indebtedness, it's about those who deliberately go into debt and hope to get away with it.

The only reason this website promotes the challenge is to increase its own publicity (and make money for its proponents!).

Once upon a time this was place for savvy consumers to pick up good bargains, it's increasingly become a political and money-making tool!

wherediditallgothen

LesD wrote: »

Come on people. When will you realise that this is all just self-serving publicity???

Why should the MILLIONS of account holders who manage their finances adequately have to cross-subsidise the FEW who run up ludicrous overdraft charges?

This is not about the odd one or two who 'slip' into indebtedness, it's about those who deliberately go into debt and hope to get away with it.

The only reason this website promotes the challenge is to increase its own publicity (and make money for its proponents!).

Once upon a time this was place for savvy consumers to pick up good bargains, it's increasingly become a political and money-making tool!

Oh dear :rolleyes: It's a shame there isn't a yawning smiley. The banks make huge profits on these charges, and we still have people labouring under the assumption that because they run their accounts well that they are cross-subsidising those who get charged.

If the company I work for had that kind of a profit margin things would be very good indeed.

LesD

wherediditallgothen wrote: »

Oh dear :rolleyes: It's a shame there isn't a yawning smiley. The banks make huge profits on these charges, and we still have people labouring under the assumption that because they run their accounts well that they are cross-subsidising those who get charged.

If the company I work for had that kind of a profit margin things would be very good indeed.

Thay may make 'profit' on the charges, but they sure as hell aren't making profit on the bad debts!

wherediditallgothen

LesD wrote: »

Thay may make 'profit' on the charges, but they sure as hell aren't making profit on the bad debts!

I'm sure they make a net profit on them. Otherwise why would they 'allow' unauthorised overdrafts. If they didn't profit, I'm sure they would be able to put a stop to them sharpish like.

Newkid

LesD wrote: »

Come on people. When will you realise that this is all just self-serving publicity???

Why should the MILLIONS of account holders who manage their finances adequately have to cross-subsidise the FEW who run up ludicrous overdraft charges?

This is not about the odd one or two who 'slip' into indebtedness, it's about those who deliberately go into debt and hope to get away with it.

The only reason this website promotes the challenge is to increase its own publicity (and make money for its proponents!).

Once upon a time this was place for savvy consumers to pick up good bargains, it's increasingly become a political and money-making tool!

A little bit of an unfair rant there LesD, you may need to revisit your theory that those who are in credit are subsidising those who are not eg. If you keep £1000 in an account how much profit do you think the bank makes off you in a year ? £50 at a stretch !!!!
If you go a few £ overdrawn how much profit do you think the bank makes off you in a month ? At least that same £50 + £25 for each letter they send you- not much change from a £100 if 2 dd,s are returned !!!!!!
Mmmm let me think , who is the Banks most valuable / valued customer !!! Just who subsidises who ?
There are Rights & Wrongs in life , Bank Charges in their current form are WRONG.

Newkid