WHY do banks refund bank charges?

masonic

inmypocketnottheirs wrote:

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

Indeed. Shame on YB for letting the facts of the matter get mixed up in everyones wild speculation, eh?

MPH80

Getting back to the original point now YB has made the correct position very clear.

I can see three reasons why the banks might not want to contest the charge:

1) They don't believe they have a chance of winning such a case, but are willing to go through the legal stages to see if they can scare the person off before court

2) Actually the costs of people claiming back these charges are a very small percentage of the number of people being charged every day - so they may as well pay - it's not worth the time/money to go to court - even for a test case. (Remember - 60 million in the UK - 13,000 members of the CAG).

3) The banks don't want other banks to know their costs. Someone else in another thread has raised that their company (n.b. not a bank) used to put these clauses in contracts - but could never enforce them because it would force them to reveal sensitive commerical information and they chose not to.

I've no idea which of the 3 it is. I don't care to be honest. I only care about the consequences to others of the claiming back - but this isn't the place to debate those - so I'll shut up now.

M.

dchurch24

masonic wrote:

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.

One case did go to court and the bank WON - they didn't lose.

dchurch24

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.

As has been quoted before in threads similar to this one - there was a case in which a judge ruled that the charges WERE a penalty clause in a contract and that a default that a customer had been given because of the charges should be removed - he then ordered a hearing at a given time after that date and the bank (BS in this case, Nationwide) paid up in full rather than go back to court.

So IT IS unlawful, not just thought to be. It has gone on record that a judge has declared the charges as such.

YorkshireBoy

MPH80 wrote:

I only care about the consequences to others of the claiming back - but this isn't the place to debate those...

I know this is off-topic but, since it's troubled me greatly since I read it yesterday, I'll mention it anyway...

A (I think?) single mother, with two kids, has posted on the credit card board yesterday that Egg have increased her purchases(!) APR from 15.9 to 21.9% APR. Although she was carrying a large balance, and "struggling to keep their heads above water", she'd managed to avoid missing any payments and, as such, has not paid any default charges.

She is now completely distraught, and told us she was literally in tears as she wrote her post.

As I say, this has troubled me greatly since I read the post yeaterday.

What troubled me further, was the fact that dchurch24 was trying to console her. I hadn't the heart to let her know who she was talking to, ie arguably the main reason for her APR increase, for fear of making the situation worse.

YorkshireBoy

dchurch24 wrote:

It has gone on record that a judge has declared the charges as such.

I'd like to research this. Please could you provide further details or, even better, a link?

dchurch24

I'm afraid not - the case was about 3-4 months ago in Scotland.

I think the claimants name was "Smith" and it was against the Nationwide.

That's all know off hand. I'll try to find more about it.

PS. There is also a case in court today in N.I.

dchurch24

YorkshireBoy wrote:

What troubled me further, was the fact that dchurch24 was trying to console her. I hadn't the heart to let her know who she was talking to, ie arguably the main reason for her APR increase, for fear of making the situation worse.

I think you give me far too much credit.

Had the credit card company not acted unlawfully in the first place, then feel the need to increase their profits when caught out (and let's remember, Egg were singled out as a specific case by the OFT as one who IS STILL 'ALLOWED' to charge more than their legitimate costs), then her rate would have stayed the same. In fact, that's probably not true. They would probably have put their rates up in any case - these people are there to make money - they don't *care* about their customers - once hooked, they will do pretty much whatever they like to increase profits.

Incidentily, you state that she had not ever received any charges - please read her thread again. You obviously missed the part where she stated that SHE HAD incurred charges on her Egg card.

You may also take note that they had also DROPPED the interest rate for many of their card holders too. I suppose that's a direct result of their charges being drop to 16 quid from 20 as well, somehow?

dchurch24

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.

I don't think this is entirely true - there have been 2 cases where the sums involved would have taken the claim out of the small claims track. One for 12k (Abbey) and one for 17k (LloydsTSB). Both settled.

If they could have won, they would have been awarded costs so they would not have been out of pocket.

I don't think it would cost £12k or £17k to defend a case of punitive v liqudated damages in a court for about an hour if they actually had any proof that the charges are not penalties.

YorkshireBoy

dchurch24 wrote:

I'm afraid not - the case was about 3-4 months ago in Scotland.

I think the claimants name was "Smith" and it was against the Nationwide.

That's all know off hand. I'll try to find more about it.

I would have though something as definitive as this, for the CAG's cause anyway, would have been at the forefront of your mind. Anyway, I look forward to reading it later.