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

Centium5000

Alpine_Star wrote: »

The general consensus is that there is little scope under CCA to challenge the charges.

UTCCR is certainly a basis on which individual challenges can be made and also that in any contested proceedings brought under UTCCR the burden of proof lies with the seller or supplier to prove that their terms are fair, rather than the claimant having to prove that they're unfair and that national courts have an obligation to assess their fairness.

Hmmm. I've been reading through the revised CCA and it does seem to apply to this situation.

Could it be the consensus formed a while ago? The relevant sections have only applied to existing agreements since April 2008.

The reason I highlighted 'individual' is because the unfair relationship provisions can only be used by individuals, whilst the UTCCR and (I believe) the Competition Act can be used by both individuals and other bodies (e.g. the OFT). The relevant text is in s140B(2). Sorry for any confusion due to my highlighting!

The CCA appears to differ from the UTCCR in another key way - the scope of what constitutes 'unfair' is much broader:

140A Unfair relationships between creditors and debtors

(1) The court may make an order under section 140B in connection with a credit agreement if it determines that the relationship between the creditor and the debtor arising out of the agreement (or the agreement taken with any related agreement) is unfair to the debtor because of one or more of the following—
(a) any of the terms of the agreement or of any related agreement;
(b) the way in which the creditor has exercised or enforced any of his rights under the agreement or any related agreement;
(c) any other thing done (or not done) by, or on behalf of, the creditor (either before or after the making of the agreement or any related agreement).
(2) In deciding whether to make a determination under this section the court shall have regard to all matters it thinks relevant (including matters relating to the creditor and matters relating to the debtor).
(3) For the purposes of this section the court shall (except to the extent that it is not appropriate to do so) treat anything done (or not done) by, or on behalf of, or in relation to, an associate or a former associate of the creditor as if done (or not done) by, or on behalf of, or in relation to, the creditor.
(4) A determination may be made under this section in relation to a relationship notwithstanding that the relationship may have ended.
(5) An order under section 140B shall not be made in connection with a credit agreement which is an exempt agreement by virtue of section 16(6C).”

That's one open list of considerations! I'm still very much in favour of Chapter 2 of the Competition Act and UTCCR 5(1), in that order, but this might be a broad way for individuals to challenge the behaviour of their specific banks.

The OFT might choose one route, MSE another and individuals the same as either, or just go with a compound list of behaviours for a county court to assess under the CCA 140B. It's good to have all the options available to choose from.

As I said in a previous post, these charges are wrong in so many ways, there will be many ways to skin these cats.

Centium5000

Link to the Consumer Credit Act 2006: Unfair Relationship provisions:

http://www.opsi.gov.uk/acts/acts2006/ukpga_20060014_en_2#pb4

PlasticMan_2

Personally, I think this is brilliant news, and would like to thank Martin in particular, and everyone else involved for their hard work in this area. I haven't had an overdraft charge in years, but I can see how unfair they are, and unlike some I would happily pay a small charge (5 pounds or so a month?) for a basic bank account (no bundled insurance I don't want or need). Unlike some people I realise that cashpoints, bank tellers, account adminstration, etc all cost money and see no reason that people in difficult circumstances should pay for my use of them.

My experience: Quite a few years ago there was a problem with my wages while I was abroad. I had a weekly standing order set up for 10 pounds (into a shared account for food spending). It failed four times that month and cost me 140 pounds (and I had no idea there was even a problem). Other direct debits failed and made that up to 250 pounds over the month - although I never went over my overdraft limit, except for the charge. I'd had money in other accounts, and wasn't in financial difficulties at the time, but after that I was, even when I did get paid, since every month I was short. The bank wouldn't budge, and I got further charges (since I couldn't very well cancel direct debits for my council tax, fuel bills, etc). Eventually, I made a successful claim for 600 pounds, which took a big chunk off my overdraft. It had been up to 1800 pounds but that gave me the breathing space to pay it all off (over a year), and get straight again.

There is something very unfair going on here. There is no way to avoid it and it needs to be sorted. Perhaps one day the smug "well you should be more organised" gang will find themselves skint and realise how difficult it is to be "organised" all of a sudden.

chrismale

Surely a legal argument for unfairness is the totally disproportionate amount of money charged for going overdrawn in addition to the interest on the actual amount overdrawn? I have heard one person on the radio say they were charged over £400 for going £10 overdrawn for a month.

Also the unfairness is that Banks do not have to reclaim this money from you like any other creditor, they simply take it out of your account making you more overdrawn and incurring yet more charges on charges debited.

LookingUp

wherediditallgothen wrote: »

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.

Reminds me of my manager 25 years ago, who pointed out that 'if we don't lend, we don't make money' when considering whether or not to pay items.

CAMEO

Just been on the site wales on line an article warning Bank Charges may not be finished yet prompted this reply:ROBSTER wrote:
Well-balanced articles considering the blatant miss reporting by the majority of the press.

Lord Phillips was emphatic that this appeal was solely concentrated on one "narrow" part of UTCCR 6(2) and had NOTHING TO DO WITH THE FAIRNESS OF BANK CHARGES. Rather the ability of the OFT to test the fairness of Bank charges under the specific clause mentioned.

Why did the OFT allow the Banks QCs to corner them on this issue is a matter I am sure they will regret.

However the campaign will continue to have the charges repaid. It is not rocket science e.g. HBOS (now Lloyds) will charge you a fiver for them not paying your Direct Debit today where as last month they required 700% times that amount for the same "service" (their words) of not paying a DD.

Section 5(5) of UTCCR specifically states that an unfair term arises when terms have the effect of requiring any customer who fails to fulfill his obligation (in this case to have enough in the account to cover the DD) to pay a disproportionately high sum in compensation.

If you do not consider a 700% mark up is not a disproportionately high sum consider how much it ACTUALLY costs you to check your balance on a computer or at a cash point if there is no money on the account you can not transfer or withdraw any, right?

How much does that cost you to administer? Almost nothing! So how can a bank justify charging a fiver and say they did you a "service" in not paying when "the computer said no" then generated a default letter to you (at a cost to the Bank of less than 45p including the cost of installing the technology to do so).

My concern is that if the OFT now go back into court with the FSA and Banks this case could be protracted over a similar period of 2-3 years as the last case.

IF SO:

Well done to the Banks, their legal advisors and spin doctors. You have almost completely defused the epidemic of claimants for bank charge refunds.

OFT and Government Ministers with responsibility to consumers:
SHAME ON YOU! It comes to something when a journalist, Martin Lewis is doing more for consumers from a self financing web site than your combined efforts at a cost of Billions to the UK tax payer.

Alpine_Star

Centium5000 wrote: »

Hmmm. I've been reading through the revised CCA and it does seem to apply to this situation.

Could it be the consensus formed a while ago? The relevant sections have only applied to existing agreements since April 2008.

The reason I highlighted 'individual' is because the unfair relationship provisions can only be used by individuals, whilst the UTCCR and (I believe) the Competition Act can be used by both individuals and other bodies (e.g. the OFT). The relevant text is in s140B(2). Sorry for any confusion due to my highlighting!

The CCA appears to differ from the UTCCR in another key way - the scope of what constitutes 'unfair' is much broader:

I'm not too versed on CCA but as I understand it there is a question mark over whether overdrafts are covered by CCA. Notwithstanding the relevant charges are not for the overdraft itself but for the 'consideration' of whether to provide one. And don't forget that many of the charges don't relate to the provision of credit at all as in the case of an unpaid item fees.

salar15

I think one important point to take from the Supreme Court decision was that not only did they leave open a challenge based on Reg 5(1), but they also said that the government may wish to take action through legislation.

Regarding the cross-subsidy argument, I'm actually very unconvinced by it. The reason is that surely the significant imbalance must relate to the position of the parties under the contract in point. The fact that it causes an imbalance between various consumers surely can't be assessed under the Regulations. As the Supreme Court said in its previous decision, that is a political decision, and I cannot see the court finding any favour in the argument put forward above.

As Martin outlined above, Reg 5(1) has three requirements.

Firstly, the clause must not be individually negotiated. No problems here, of course; you can't individually negotiate banking contracts very easily.

Secondly, it must be contrary to the requirements of good faith. I think it will be difficult to convince the court on this point. The only real route would be to say that the charge is wholly disproportionate, but the Supreme Court effectively dismissed this in its judgment on Regulation 6 by saying that the charge is part of the price in consideration for the entire package of banking services. Perhaps one could say that it is a term that most consumers could not reasonably become acquainted with before entering into the contract, but that is relatively far-fetched as well, given that banks make it clear when you set up an account what the consequences of going overdrawn are. I'm short of good ideas on this point.

Thirdly, it must cause a significant imbalance in the parties' rights and obligations to the detriment of the consumer. Again, this could be problematic. The rights and obligations are set out at the start of the contract, and don't change. An argument could perhaps be that once you go overdrawn, you end up being plunged into a debt spiral because it becomes harder and harder to claw your way back into the black. The argument that the obligation to pay the charge is disproportionate to the actions that the bank must take (sending letters, making an overdraft facility available, etc), is most logical, but again, as stated in point 2, is effectively barred by the recent Supreme Court decision. If the obligation to pay the charge is part of the price for the entire banking service, there won't be a significant imbalance in the parties' rights and obligations.

I don't want to be unduly pessimistic, but I can't see that legal challenge will go very far on this point. Of course, top barristers will make a very decent go of it, but it seems unlikely that a court would be convinced. I can't help thinking that maybe the money would be better spent lobbying the banks or the government for a change in the rules. I'm reliably informed that in Ireland, you can determine when entering into the contract whether you wish to have an overdraft facility available or not. That is of course contrary to the position here, where a request for money which would take you into the red will set up an informal overdraft regardless of whether you contemplated it or not. Simply circumnavigating this piece of law by express stipulation in the banking contract would no doubt help. After all, if the Irish banks can manage without the revenue stream from overdraft charges, and still don't put a price on debit transactions and standing orders (as they do in France), then I'm not clear why they need to in England.

salar15

Just to add to that screed, I see several people above have commented on overdraft charges being unfair, because they are out of all proportion to what you going overdrawn actually costs the bank. This is true to some extent, but the court made it very clear it was not convinced by that argument. It felt that because you were getting a lot of other services for free, you couldn't just divorce the overdraft charges from the other services under the contract. That is to say, it was part of the price for the whole package, not simply going overdrawn. Regardless of the merits of that argument, a ruling from the highest court in the land is not the easiest thing to overturn.

Also, there is a lot of angst over the cross-subsidy point. I agree with PlasticMan on this - there is no reason why someone who is in a worse position than I should be subsidising my account. I'm unconvinced that even if overdraft charges were made more 'fair', there would have to be a charge for debit transactions and standing orders (those who use credit cards would probably get hit even harder instead), but that is purely speculation. The problem is, that is a political question, and the courts are NEVER going to get involved with it. They made that very clear in their judgment. It's a question for the government and the enactment of new legislation, which is why I made the point that we should perhaps be concentrating our resources in that direction, rather than bringing expensive claims to court once again.

liamaxina

All the talk about reclaiming bank charges has been about overdraft charges. All my charges - around £2,000 - are charges made for NOT paying a direct debit because there was not enough money in the account to pay it. I cannot see how any bank can claim that it costs them £39 to say 'no we are not paying this direct debit'. I have been charged £39 for an unpaid direct debit of £3.00! I have had to cancel most of my direct debits because I cannot guarantee that the money will be there when they are due and this means that I am penalised by the companies I have to pay because if you don't pay by direct debit you pay a higher premium for things such as electric, gas etc. My mortgage company charges me £15 per month because I don't pay by direct debit! Can I claim that this is an unfair charge too? Sorry, I'm going off the point. What I really need to know is, does this judgment apply to the charges for unpaid direct debits also? Is it worth still pursuing this claim?