WHY do banks refund bank charges?

GSD4ME

My humblest apologies if this has been aired before, but I could not find anything like it on this board.

I do NOT want to go over the very well rehearsed arguments about whether or not people should reclaim bank charges, but I am very curious as to why banks pay up as they seem to do.

My bank has just repaid the charges, interest and court fees without even asking for a detailed breakdown of the amount. I am well pleased, of course, but as they stated that the charges were "fair, transparent and reasonable" it seems pretty weird that they should pay up without a fight.

This looks to me that they know they have not got a cat in hell's chance of winning. At the moment, I suppose the number of customers claiming their charges is pretty small, but once news spreads I reckon there will be heaps more so the banks stand to lose a lot of money if they keep paying out.

I would have thought that if they took just one case to court and contested it that would make customers think twice and if the bank won one case people would stop taking the risk of a court case in case they had to pay the bank's costs.

I cannot see that it is sound commercial sense for the banks to pay up.

What do others think?

Gordon_the_Moron

The charges are illegal, they won't risk going to court in case they lose, which they nearly certainly would. The charges are transparent admittedly that is true, but do you consider charging someone £50 for going 1p overdrawn for 5 days (which Alliance and Leicester would) for example fair and reasonable.

The charges are illegal, simple as, they won't let it go to court, if they won they would have a stronger case for telling people where to go but if they lost it would make the national press and it would open the floodgates.

masonic

One case did go to court and the bank lost. It's by no means clear-cut, but for the time being banks seem to prefer settling out of court rather than face all the negative publicity a court case would generate and the risk losing the case anyway.

Tallymanjohn

Can someone please post one of the original links to the bank-charge refund discussions? - I think I missed out on this one.

TIA

PBA

Nothing to do the charges being illegal, if a case did go to court the bank would have no problem winning. The problem unfortunately lies in the fact that, faced with a claim for £1000-2000, it would cost the bank at least that in legal costs for each case they defend. Added to that is that there is no precedent in the small claims courts, so even after a bank won their first case they would then have to keep putting up a defense on every case after that, even though each case would be the same and lead to the same conclusion. Sadly it's far cheaper for them to write a cheque than to actually defend their legal position.

masonic

PBA wrote:

Nothing to do the charges being illegal, if a case did go to court the bank would have no problem winning.

...presuming they didn't forget to mount a defence.

If the opinion of the court had anything in common with the opinion of the OFT, I think any bank taking that attitute would be in for a shock.

tomstickland

The problem isn't with the charges, but with them being unreasonable in relation to what it costs them to sort the problem.

mountainofdebt

PBA wrote:

Nothing to do the charges being illegal, if a case did go to court the bank would have no problem winning. The problem unfortunately lies in the fact that, faced with a claim for £1000-2000, it would cost the bank at least that in legal costs for each case they defend. Added to that is that there is no precedent in the small claims courts, so even after a bank won their first case they would then have to keep putting up a defense on every case after that, even though each case would be the same and lead to the same conclusion. Sadly it's far cheaper for them to write a cheque than to actually defend their legal position.

Sorry I can't agree with this.

Yes on a case by case basis it must be cheaper for the bank to settle rather than have a day in court but collectively it must be worth them going the whole hog in a test case.

I reckon that the reason why so many people are claiming their charges back is simply because they know that the banks will make them jump through a few hoops but at the end of the day they (the banks) will back down. If they took only one person to court, then I reckon the number of people who would be willing to go as far as threatening to go to court would dramatically fall.

I know I wouldn't have got into a poker game with the banks if I thought there was a strong possibility of having to court. However I looked upon it as a poker game where I could see their cards.

meerustar

The bank charges are not 'illegal' but 'unlawful'. There is a difference.

Also, the banks would have to show a breakdown of how much it really costs because of a missed DD, or to send a letter etc.

No bank wants to be the first to set a precedent in the small claims court and that's why those reclaiming charges are advised to try and stay below the £5000 limit.

YorkshireBoy

meerustar wrote:

The bank charges are not 'illegal' but 'unlawful'.

They're not even 'unlawful' - they're thought to be 'unlawful', because the size of the default charge is thought not to reflect the actual cost to the organisation of the transgression of the T&C's governing the account.

Only a judge can rule something as 'unlawful' and, as yet (and to the best of my knowledge), no such specific case has actually been brought before a judge.

inmypocketnottheirs

YorkshireBoy wrote:

They're not even 'unlawful' - they're thought to be 'unlawful', because the size of the default charge is thought not to reflect the actual cost to the organisation of the transgression of the T&C's governing the account.

Only a judge can rule something as 'unlawful' and, as yet (and to the best of my knowledge), no such specific case has actually been brought before a judge.

Wondered how long it would be until someone came along here and started splitting hairs over this issue.:rolleyes: