Is this a loophole?

ewan_husahmi

Banks are not allowed to impose 'penalties', but are allowed to make 'charges' for 'services' such as unauthorised overdrafts.

What about when they 'decline' a 'service'?

Case in point - my bank just declined two small payments, about a fiver each. They then 'charged' me 40 quid for this.

If they are charging me, I must have received a 'service', in which case I am enititled to know what it is, and it should be something I asked for.

If they have declined to perform a service that was requested, they have no legal grounds for charging.

Am I right? If there's a way I can charge someone for a service I refuse to perform, I'd love to know how.

esmerellda

The supreme court actually ruled the charges were part of the price for having the bank account and not directly linked to the transactions that cause them (grrrrrrr how i will never know) but the actual situation is the SERVICE you speak of is the CONSIDERATION of whether to pay or not.

So you are paying for the bank making a decision, rather than what the decision was.

Does that make sense?

ewan_husahmi

Further to that question:

There is something that really stinks about refusing to honour a payment, but then making a charge that is greater than the amount declined. It effectively says 'we deem you too poor to pay a legitimate creditor, but rich enough for us to help ourselves to even more'.

The general point of bank charges may have been settled, for now. But what about the use of sharp practice to impose them?

There should be something in the banking code of conduct that says that the fee for declining payment cannot be greater than the payment declined. Anyone agree?

ewan_husahmi

esmerellda wrote: »

The supreme court actually ruled the charges were part of the price for having the bank account and not directly linked to the transactions that cause them (grrrrrrr how i will never know) but the actual situation is the SERVICE you speak of is the CONSIDERATION of whether to pay or not.

So you are paying for the bank making a decision, rather than what the decision was.

Does that make sense?

Yes, the answer makes sense, thanks for the explanation.

Of course the situation makes no sense: I run a business, if my customers ask me if I want to do a job I can't charge them for my reply.

Even Ryan Air don't do that, and we know they would if they could. So in most cases this is not deemed lawful behaviour, hasn't the court got this wrong?

ewan_husahmi

Okay, I'm on my soapbox and post-happy now, but there is one further point:

If consideration is the service, then the fee is different depending on the answer: in other words we still are in receipt of a service who's specification can't be known to us until after we have received it.

Moreover, the answer can be changed by the party providing the 'service' in order to screw us and favour them. We cannot control their answer, or change our minds once we know their answer.

But if the answer is clear in advance because of the terms and conditions, then there is nothing to consider. So no service has been performed.

The bank is billing us to meet their needs and not ours.

What about invitation to treat? Wasn't that invented to deal with this?

There must be a dozen ways the court have messed this up.

Alpine_Star

ewan_husahmi wrote: »

Yes, the answer makes sense, thanks for the explanation.

Of course the situation makes no sense: I run a business, if my customers ask me if I want to do a job I can't charge them for my reply.

Even Ryan Air don't do that, and we know they would if they could. So in most cases this is not deemed lawful behaviour, hasn't the court got this wrong?

There are many instances in which consideration is a chargeable service. One example cited during the test case was the fee for an application for silks - for barristers to join the bar. The fee is for the consideration regardless of the outcome.

esmerellda

another point to make (which I know everyone will ignore as everyone has so far and I do go on and on about it) is in south african competition commission report where they actually disclosed how much the service of bouncing or paying a DD when overdrawn cost - it cost MORE to decline than to pay.

ewan_husahmi

Alpine_Star wrote: »

There are many instances in which consideration is a chargeable service. One example cited during the test case was the fee for an application for silks - for barristers to join the bar. The fee is for the consideration regardless of the outcome.

Good point, but it is not the same.

If Barristers had to pay more to fail than to pass I think they'd rightly get the hump. Similarly, if the outcome had the appearance of a commercial decision and lacked transparency, fairness or consideration of merit then it would not be acceptable.

And if bar application is a profit-making business, where the candidates most likely to fail were automatically on a different tarrif, how would that be tolerated?

ILW

ewan_husahmi wrote: »

Okay, I'm on my soapbox and post-happy now, but there is one further point:

If consideration is the service, then the fee is different depending on the answer: in other words we still are in receipt of a service who's specification can't be known to us until after we have received it.

Moreover, the answer can be changed by the party providing the 'service' in order to screw us and favour them. We cannot control their answer, or change our minds once we know their answer.

But if the answer is clear in advance because of the terms and conditions, then there is nothing to consider. So no service has been performed.

The bank is billing us to meet their needs and not ours.

What about invitation to treat? Wasn't that invented to deal with this?

There must be a dozen ways the court have messed this up.

As a businessman, I would have thought a tight control of cash and knowing the bank situation at any time was critical. Better to just stay within the limits rather than getting charged and moaning about it.

ewan_husahmi

esmerellda wrote: »

another point to make (which I know everyone will ignore as everyone has so far and I do go on and on about it) is in south african competition commission report where they actually disclosed how much the service of bouncing or paying a DD when overdrawn cost - it cost MORE to decline than to pay.

It is a good point, and I really don't begrudge banks covering their costs, or even making a profit.

But bank charges are not based on cost to the bank, they are based on the law of supply and demand. In this particular market, demand is greatest for those with least choice, so they pay the most.

It's an extreme example of the fact that poor people pay far more for everything. Sometimes this principle is down to economies of scale, which is fair.

But in this case it's surplus value arising out of inability to walk away. In other words it's exploitation of the vulnerable, and civil society is supposed to prevent it.

Alpine_Star

As a legal principle the test case has established that the banks have complete discretion to charge what they like for the service of consideration and it doesn't get anymore complicated than that.