MSE News: Guest Comment - Bank charges fight still alive

*MF*

Because they were repetitive, I decided not to post "full" extracts from the blog, for the three remaining examples of the FSA taking action against firms.

However, below you will find very brief extracts, and links to the source documents in each of those three examples.

Please do not think that the fact that they are "repetitive" is a negative - it is the opposite. It shows (and I will be posting further evidence on this) that the FSA have applied their "Rules" and higher level "Principles" in a consistent manner.

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15 July 2010

The Financial Services Authority (FSA) has today fined Redstone Mortgages Limited (Redstone) £630,000 for poor treatment of some customers facing mortgage arrears.

The firm has agreed to redress customers who were charged unfair and/or excessive charges while they were in arrears. It is estimated that the redress will cost the firm up to £500,000.

Margaret Cole, director of enforcement and financial crime, said:

"Many of Redstone’s customers were in a vulnerable position, having fallen into arrears on their mortgage payments, and firms should not charge such customers excessive and unfair fees. This is not how the FSA expects lenders to treat customers in arrears.

"Rather than assessing each customer’s personal and financial circumstances on an individual basis, the firm was applying a one size fits all approach by aiming to reduce arrears to less than two months.

"The FSA is committed to clamping down on mortgage lenders who fail to adhere to treating customers fairly rules. We are crystal clear about the standards we expect and will take tough actions against firms who breach these rules. "

Link to Press Notice:

http://www.fsa.gov.uk/pages/Library/Communication/PR/2010/120.shtml

Link to Final Notice:

http://www.fsa.gov.uk/pubs/final/redstone.pdf

4 November 2010

The Financial Services Authority (FSA) has fined small mortgage lender, Bridging Loans Ltd, £42,000 and its director Joseph Cummings £70,000 for serious failures relating to lending practices and for failing to treat customers fairly in arrears.

The FSA has also banned Joseph Cummings, and taken action to prevent three other directors at the firm from being able to operate in senior positions within the financial services industry. This is the first case of its kind by the FSA against a mortgage lender’s senior management concerning irresponsible lending and unfair practices in respect of dealing with customers in arrears.

Link to Press Notice:

http://www.fsa.gov.uk/pages/Library/Communication/PR/2010/159.shtml

Link to Final Notice:

http://www.fsa.gov.uk/pubs/final/joseph_cummings.pdf


22 February 2011

The Financial Services Authority (FSA) has today announced that it has fined DB Mortgages, part of the Deutsche Bank Group, £840,000 for irresponsible lending practices and unfair treatment of customers in arrears, and secured redress of approximately £1.5 million for DB Mortgages’ customers.

Margaret Cole, the FSA’s managing director of enforcement and financial crime, said:

"Firms need to understand that we will not tolerate lax lending practices and unfair treatment of customers in arrears.

''Firms which fail in their obligations to customers should expect not only a substantial fine but also that they will have to pay back customers who have been disadvantaged by their failings''.

Link to Press Notice:

http://www.fsa.gov.uk/pages/Library/Communication/PR/2011/025.shtml

Link to Final Notice:

http://www.fsa.gov.uk/pubs/final/db_uk.pdf

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Extract from blog which follows the last entry:

So, we have five examples of the FSA taking regulatory action against firms - dating as far back as October 2009 to the near present day in February 2011.

What do they tell us about the manner in which the FSA enforce both their "Rules" and higher level "Principles"?

What part do they play over the question of the fairness or otherwise of bank charges?

The answers to those questions will be addressed in the posts that follow.

They lead to this:

Let's ask Lord Turner and the FSA this very simple question:

Do you believe that the charges levied by Banks on their customers were and are fair or unfair?

I will also begin to cover the crucial distinction arising from the recent Court ruling in the Judicial Review in the BBA challenge to the FSA and the FOS regarding PPI - the crucial distinction over how the application of these FSA "Rules" and "Principles" are to be applied, and have now been recognised in law following that Court judgement.

The "evidence" I will lead will allow you to judge for yourself:

1 - why that question addressed to Lord Turner and the FSA - when answered - plays a unique part over the question of the fairness or otherwise of bank charges.

2 - why that recent Court ruling in that it reveals a crucial distinction between the FSA and the FOS - plays an equally unique part over the question of the fairness or otherwise of bank charges.

3 - why the OFT have proven to be the wrong route to follow to find an answer to the question of the fairness or otherwise of bank charges

4 - why despite all of the costs involved to date, despite the many column inches in the media, despite the financial and emotional difficulties faced by many who have faced these charges - we have not yet gained an answer to whether bank charges are fair or not.

I hope the posts and "evidence" to follow will play their part in finally answering that question.

I hope to see you here as those posts appear and that "evidence" is provided.

*MF*

Please meet the Co-ordinating Committee - Part 1

It is time I think to introduce you to a Committee which directly and specifically links the FSA, the OFT and the FOS - a co-ordinating committee. It was formed after discussion and consultation in February 2011. Very late in the day some might suggest.

Despite its relatively recent appearance, it may prove to be a pivotal body in reaching an answer as to whether bank charges are fair or unfair - not least because it is a committee on which all three of those bodies get together, but more importantly because of why they get together.

Let me explain.

Via this link you will find the Terms of Reference for the co-ordinating committee -

Let's look at some extracts (some of which I have highlighted and will give an explanation for so doing in my next post):

Coordination Committee
terms of reference

Functions

1. The main functions of the Coordination Committee (CC) are to:

(a) contribute to the identification of emerging risks that have the potential to cause widespread detriment amongst financial services consumers;

(b) coordinate consideration of whether:

o emerging risks with the potential to cause widespread detriment should be dealt with through firms’ complaints handling and the Financial Ombudsman Service (ombudsman service) or through regulatory intervention by the Office of Fair Trading (OFT) or the Financial Services Authority (FSA);

o risks that are causing widespread consumer detriment should continue
to be dealt with by firms’ complaints handling and the ombudsman
service or through regulatory intervention by the OFT and FSA;

(c) promote alignment between the OFT’s or the FSA’s response to emerging risks and widespread issues and the ombudsman service, with regard to the potential differences between the regulatory approach and how the ombudsman service is required to deal with individual complaints;

(d) promote alignment in key communications about the positions of the
ombudsman service and the FSA or OFT in the handling of emerging risksand widespread issues; and

(e) contribute to the effective exchange of information between the FSA, OFT, and ombudsman service.

4. Membership of the CC will comprise the FSA’s Conduct Risk Division, the Executive Director of the OFT’s Markets and Projects Group, and the ombudsman service’s Decisions Director. Each member will be accompanied by no more than two other persons. A Director at the FSA will be the chairman.

Procedures

6. The CC will meet at regular intervals, at least four times a year. The CC will meet on an urgent basis outside of scheduled meetings if, in the opinion of the member seeking the meeting, it is necessary in order for the committee to fulfil its functions.

7. The CC will invite any person to take part in considerations that are consistent with the discharge of the committee’s functions.

8. The CC will make public the issues it has considered. It will also make public the actions taken by the FSA, OFT and ombudsman service where they relate to the committee’s considerations.

9. Information sharing within the CC will be subject to the restrictions set out in the memorandums of understanding between the FSA, the OFT and the ombudsman service.

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Those of you following this blog will already know that earlier I used this test:

Test 3: Evidence that the Concordat agreed between the Financial Services Authority and the Office of Fair Trading established the basis for real consumer detriment and serious regulatory failings.

Item 9, the last item in those extracts above makes clear mention of such Memoranda of Understanding. There have been so many I have described them as a blizzard (earlier posts on this blog will justify that description)

Might it be that this new committee is a way of seeing through that blizzard, and reaching an answer over bank charges, and whether they are fair or unfair?

One would hope so, particularly when the opening paragraphs to the terms of reference for the committee read as:

1. The main functions of the Coordination Committee (CC) are to:

(a) contribute to the identification of emerging risks that have the potential to cause widespread detriment amongst financial services consumers;

You don't need to look very far, or google for very long using "bank charges" as the two words involved to find that literally millions of individuals have been affected by the imposition of bank charges.

So, is help available at long last? Will this committee recognise the effect of bank charges on those millions of individuals, and offer an answer to what is essentially a very simple question:

Are bank charges fair or unfair?

Please always bear in mind the earlier evidence in this blog of what the Supreme Court said in their Press Summary:

This appeal involved a relatively narrow issue. The Supreme Court had to decide not whether the banks’ charges for unauthorised overdrafts were fair but whether the OFT could launch an investigation into whether they were fair.

So have we now seen a body formed, albeit late in the day, that will look at that simple question - and then answer it?

We need to look at the first set of "Minutes" from the co-ordinating committee to see what they have, and have not, indentified as emerging risks that have the potential to cause widespread detriment amongst financial services consumers.

Sadly might it be that the co-ordinating committee, comprising the FSA, the OFT and the FOS are but the latest example where their efforts, or lack of them, have yet again established the basis for real consumer detriment and serious regulatory failings. It would be quite something if there were "evidence" that was the case, would it not?

Did they identify "bank charges" in that category? Were they aware of the millions affected by bank charges, who wanted an answer to that simple question?

Crucially, why - given that the Supreme Court cannot have made it any clearer (could they?) - that their decision was in no way related to answering the question of fairness or otherwise -surely the issue of bank charges and its effects on millions of people, surely that simple question would appear on the committee's radar? Surely?

It really would be quite something if there were "evidence" that it was not considered at all. would it not?

Ironically, perhaps, even more important would be to understand why - if indeed it was not addressed.

The next - set of posts - will let you have the "evidence" you need to answer those questions. Starting with those first set of "Minutes".

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Link used for Terms of Reference:

http://www.fsa.gov.uk/pubs/other/cc_tor.pdf

*MF*

Please meet the Co-Ordinating Committee - Part 2

Ok - let's take a look at those first "Minutes" of the recently established Co-ordinating Committee - a committee which includes senior individuals drawn from the FSA, the OFT, and the FOS.

If you have just finished reading the last post on this blog, you will know I am looking for a reference, any reference at all to the issue of bank charges. That's all, just a reference, even a passing comment, anything!

Well, let's see, here are the - "The Minutes"

You will first find the list of attendees at that first meeting of the committee held on the 25th of February 2011. All hold senior positions in each of those three organisations, as was intended when the committee was established.

These are the headings you will find - Credit brokerage: Adequate explanations and assessment of creditworthiness and affordability : Credit and store cards : Debt freeze/debt waiver products : Peer to peer lending : Exchange Traded Funds (ETFs) and other exchange traded products : Self-invested personal pensions (SIPPs) : Housing and mortgage market related risks : Payday loans : Cases to the ombudsman service : Retail Conduct Risk Outlook (RCRO) : Feedback statement to DP 10/1 : Reporting and monitoring of risks.

Now did you spot the heading on "Bank Charges"? Nope, neither did I. Did you use the link, and read every word, look at every paragraph - and not just take my word for it?

Maybe you looked under AOB?

A.O.B

There was no other business to discuss.

Nope, not there either.

I don't know how much you may know about the regulatory world, the world inhabited by the likes of the FSA, the OFT and the FOS, but suffice to say it is a world in transition. It has happened before, Gordon Brown once took the regulatory world apart (as it was) and reconstructed it - that was where the FSA first was born, under Gordon Brown.

The current Coalition Government are in the throes of taking it apart, and reconstructing it all over again. There will be nobody who has any interest in the world of regulation who is unaware of the changes that are underway - and that is true (at least one sincerely hopes it is true) of all those who attended that meeting.

It is they and their colleagues who are responsible now - today, responsible through a transition period over the next few years, and responsible thereafter for ensuring that what Parliament and the current Coalition Government say should happen - happens!

An important task - a very important task indeed.

So it raises this very interesting question - do they know what plans are in place under the current Coalition Government over this issue of bank charges? Nope, I am going to deliberately repeat what should be a ridiculous question - do they know?

Let's look at something from the Coalition agreement - the one formed by the current Coalition Government.

Here is where to source the complete document.

I just want to use one extract from it, this one:

We will introduce stronger consumer protections including measures to end unfair bank and financial transaction charges.

Yes, you might well shout "Eureka!" - the Government recognise something that links the word "unfair" with the two words "bank charges".

Yes it is good to find someone, in fact anyone, beyond those affected by the issue who does recognise there is in fact an issue.

But let's leave the politicians out of it for now - that is for later, let's just stick for now with those "Minutes", and the complete absence of any reference to bank charges. I wasn't really looking for words such as "fair" or "unfair", that might have been a hope too far.

I was just looking for the merest reference of any kind whatsoever to "bank charges". Just two words. More would have been good, but that was all I really wanted to read - that the issue was on the committee's agenda.

Stop for a moment - try this:

Imagine you were one of those attending that meeting, imagine you hold a senior position in either the FSA, the OFT, or the FOS.

Now would you think it likely that you would be aware of the three Court cases involving that issue over bank charges - or would that have slipped your notice, passed you by entirely, you just did not know about the specifics of the ruling the Supreme Court pronounced?

If that were the case should you be at the meeting, indeed should you be in the job at all?

Would you think it likely that you would be aware or unaware of the Coalition Government's proposals to address "unfair" "bank" "transactions" - or would you be blissfully unaware that they were even thinking about it.

Again, if was not something that you had any knowledge of whatsoever, should you be at the meeting, indeed should you be in the job at all?

If this was the very first meeting of a newly established co-ordinating committee, inclusive of senior figures from the FSA, the OFT, and the FOS do you think, maybe, just maybe, "bank charges" might just get a mention somewhere - even just a passing comment under AOB?

But there is nothing, nada, zilch.

Beyond perhaps wondering what on earth is going on - maybe the more important question is - why is there no mention of the issue over bank charges.

Why, given the responsibilities of those involved,

Why given the publicity that has raged around the issue of bank charges for years,

Why given a clear statement that the very issue of "unfair" bank charges is on the Coalition Government's agenda

Why do you think the issue over bank charges is nowhere to be seen on the Co-ordinating committee's agenda?

What possible explanation could there be?

The next post will address those questions.

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Link to "The Minutes":

http://www.fsa.gov.uk/pubs/other/cc_25feb11.pdf


Link to Coalition Government Agreement:

http://www.cabinetoffice.gov.uk/sites/default/files/resources/coalition_programme_for_government.pdf

*MF*

Bank Charges are unfair! - Proof beyond any reasonable doubt? - Part 1


If you are amongst those who have been following this blog - we are nearing a conclusion. If you are new to reading these posts - welcome!

To reach that conclusion we need to decide my role, and yours - yes indeed, you have a part to play in all of this - the single most important part of all - let me explain why.

Evidence is information that helps form a conclusion; proof is factual information that verifies a conclusion.

The many posts, so far, in this blog have contained evidence, I now intend to use that evidence (with some yet to be added) as proof sufficient to verify this conclusion:

Bank charges are unfair!

In most Western legal systems there are two forms of proof - one related to a criminal trial and one related to a civil action in a court.

In a civil action, the proof required, on the evidence presented, is that a conclusion can be reached by a jury - on the balance of probabilities.

In a criminal trial, the proof required, on the evidence presented, is that a conclusion can be reached by a jury - if it is beyond any reasonable doubt.

I intend to take the harder of those two - proof beyond any reasonable doubt - that bank charges are unfair.

That is my task. And, it ain't easy. Many would say it is well nigh impossible.

What is yours?

Well, we need a jury - you are the jury!

Ultimately - it will be your verdict alone which counts.

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Let's have a practice session.

In my last post, I gave you evidence related to a meeting of the Co-ordination Committee, consisting of the FSA, the OFT and the FOS.

I entered into evidence the "Minutes" of the first meeting of that committee - February 2011.

I asked you to see if they discussed the subject of "bank charges".

That was "evidence".

Does it prove to you - beyond any reasonable doubt:

- that the three bodies principally responsible in the matter of "bank charges"

- that the three bodies most closely involved in the long running saga over "bank charges"

- did not have that subject on their agenda?

You have the evidence - is it proof, beyond any reasonable doubt?

You are the jury! Reach your verdict.

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In each of the posts that follow - I will take forward some of the evidence presented earlier in this blog, I will also add further evidence, I will then use each item of evidence as proof that bank charges are unfair.

As I do so - I would ask you to remember THE single most important requirement a court imposes on a witness - that they tell the truth, the whole truth, and nothing but the truth.

Remember this earlier item of evidence - from the Supreme Court Press Summary?

This appeal involved a relatively narrow issue. The Supreme Court had to decide not whether the banks’ charges for unauthorised overdrafts were fair but whether the OFT could launch an investigation into whether they were fair.

Lord Walker made clear that the scope of the appeal was limited – the court did not have the task of deciding whether or not the system of charging current account customers was fair, but whether the OFT could challenge the charges as being excessive in relation to the services supplied in exchange (Paragraph 3).

Is the reason why to date nobody yet has an answer as to whether bank charges are fair or unfair lies in whether - you the jury - have been told the truth, the whole truth, and nothing but the truth?

*MF*

Bank charges are unfair! - Proof beyond any reasonable doubt? Part 2

On the 27th July 2007, the Financial Services Authority issued a Press Notice, headed - " FSA grants waiver to firms on complaints handling" (1)

In it, Clive Briault, Managing Director, Retail Markets, said:

"We have granted the waiver to help facilitate this test case. We believe it is not in the interests of all consumers for complaints to continue to be dealt with in the current inconsistent way. Once there is certainty on these charges, complaints can be dealt with fairly and consistently."

If the waiver was granted to facilitate the test case, and to obtain certainty on charges, some questions arise:

- was it 100% clear that the test case would indeed obtain the required certainty on charges? No room for any doubts?

- was it 100% clear that the test case would leave no doubts whatsoever, that there would be absolute certainty? No, not one, doubt?

- was it in any way guaranteed that the test case would completely remove the inconsistent way in which complaints were dealt with? No room for any doubts?

Let's remind ourselves what the Supreme Court Press Notice (2) said, and break it down into its individual parts:

This appeal involved a relatively narrow issue.

The Supreme Court had to decide not whether the banks’ charges for unauthorised overdrafts were fair

but whether the OFT could launch an investigation into whether they were fair.

Lord Walker made clear that the scope of the appeal was limited

the court did not have the task of deciding whether or not the system of charging current account customers was fair,

but whether the OFT could challenge the charges as being excessive in relation to the services supplied in exchange (Paragraph 3).

When you compare the reasons given for the issue of that waiver by the FSA, the need to end inconsistency, the need to obtain certainty, when you compare those reasons with what the Supreme Court was actually asked to address - a narrow issue

You are the jury ... does the final Supreme Court judgement in that test case

- convince you - beyond any reasonable doubt - that all inconsistencies have indeed been removed, and that we now have the promised certainty?

- do you now have a complete legal answer as to whether bank charges are fair or unfair - no room for any doubts, not one?

You are the jury. Form your verdict.

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Lord Turner, the Chairman of the FSA appears to have formed his verdict, he appears to have reached his conclusions? Let's see if they agree with yours.

The Supreme Court issued that Press Notice, and their final judgement on the 25th of November 2009.

On that very same day, the Treasury Select Committee held a meeting. Before it as witnesses were Lord Turner, Chairman of the FSA, and Hector Sants, CEO of the FSA.

During the questioning (3), Lord Turner made this comment to the Committee:

" ... the FSA had put in place a waiver for firms so that they did not have to deal with complaints about unauthorised overdraft charges in the time specified under our dispute resolution rules. We had been doing that because we felt that there was no purpose in a flow of complaints before there was legal certainty one way or another as to what the situation was, but that waiver has effectively ceased today; it was clearly linked to this decision and the moment that there was legal clarity that falls away."

Pardon? Lord Turner appears to believe there was legal clarity. Well, there was indeed legal clarity - that is the truth - but was it the legal clarity, the certainty over charges for which the waiver was issued by the FSA. Did that legal clarity - on that narrow issue - remove all inconsistencies, did it remove all uncertainties, was there now no need whatsoever for any waiver - because we all now had legal clarity?

Did everyone now know the answer to whether bank charges were fair or unfair. Well, might I suggest it was everyone except the Supreme Court perhaps ... and yes, me and you.

Perhaps, this further comment from Lord Turner to the TSC on that day will explain what Lord Turner was thinking:

"... I think that it is clearly the case that the argument about whether these charges in the past can be deemed to be unfair, which is probably the basis of most of the complaints that have been brought forward, has been definitively resolved by the Supreme Court ..."

You are the jury

Do you agree with Lord Turner?

Do you agree - beyond any reasonable doubt - that the argument about whether these charges in the past can be deemed unfair [ ... ] has been definitely resolved by the Supreme Court?

Do you agree when the Supreme Court's words were:

The Supreme Court had to decide not whether the banks’ charges for unauthorised overdrafts were fair

the court did not have the task of deciding whether or not the system of charging current account customers was fair,

If you do agree with Lord Turner, despite that evidence of what the Supreme Court actually said, perhaps there is little point in reading further.

Personally, I don't agree, personally I cannot see how anyone could agree with Lord Turner's comments to the TSC - which is why this blog exists, and why since its inception I have ensured that Lord Turner, the FSA, the FOS, the OFT, the TSC and others are all aware of its existence.

If you disagree with Lord Turner's thinking, and feel that there is still a completely unanswered question over the fairness or otherwise over bank charges, then please keep reading.

I will offer both evidence and proof of why - bank charges were and are unfair - contrary to Lord Turner's view.

A bit later on it will include - as only one item of that proof - the reason why I highlighted the word "all" earlier. You didn't notice that? It's way back at the beginning in Clive Briault's comments, when he referred to "all" consumers. That simple three letter word "all" - as in "all" consumers has a major part to play.

But for now, let's briefly re-visit the Co-ordination Committee - why are bank charges not on their agenda?

Well, perhaps the views expressed by Lord Turner explain at least one reason why the Co-ordination Committee do not have the subject of bank charges on their agenda. They may have concluded - perhaps as Lord Turner may have concluded - that the issue is dead. Do you know of any other reason?

You are the jury

Is the issue dead as far as you are concerned? Or would you like proof that - bank charges were and are unfair?

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PS: The links to the numeric notations in this and further posts in this blog will appear in an addendum at the conclusion of the blog.

*MF*

On the day the Supreme Court gave their ruling, Adair Turner and Hector Sants appeared before the Treasury Select Committee - these are extracts from Adair Turner:

" ... I think that it is clearly the case that the argument about whether these charges in the past can be deemed to be unfair, which is probably the basis of most of the complaints that have been brought forward, has been definitively resolved by the Supreme Court ..."

" ... There was a clear legal decision, you have to remember, that the banks were justified in doing this."

Source: http://www.publications.parliament.uk/pa/cm201011/cmselect/cmtreasy/uc612-ii/uc61202.htm

So we have the head of the FSA, with his CEO in attendance, and the TSC accepting his statements (that is an example of where I have to give you more source evidence) - Adair Turner says ...the matter of fairness or unfairness was definitely ruled on by the Supreme Court.

Was it? What did the SC decide and rule on? Use these extracts from the SC Press Release that day:

" ... This appeal involved a relatively narrow issue. The Supreme Court had to decide not whether the banks’ charges for unauthorised overdrafts were fair but whether the OFT could launch an investigation into whether they were fair."

" ... Lord Walker made clear that the scope of the appeal was limited the court did not have the task of deciding whether or not the system of charging current account customers was fair, but whether the OFT could challenge the charges as being excessive in relation to the services supplied in exchange (Paragraph 3)."

Source: http://www.supremecourt.gov.uk/decided-cases/docs/UKSC_2009_0070_PressSummary.pdf

If, like me, you recognise the stark difference - we have our start, let's look at what else Adair Turner said to the TSC:

" ....Lord Turner: This is an issue that we’ve discussed at great length, because we did discuss at great length the issue of the unauthorised overdraft charges where, you are absolutely right, the process was, you have a core product that might not make money out of the person who doesn’t go into overdraft, but the moment they go into overdraft they get hit by unauthorised overdraft charges. There was a clear legal decision, you have to remember, that the banks were justified in doing this. Even before that, this was more an issue for the OFT than us, because you have to remember we do not regulate at the moment consumer credit, and overdrafts count as consumer credit. But the answer is, when and if all that is tidied up, yes, I do think the appropriate regulatory authority should be directly looking at both the transparency and indeed the level of unauthorised overdraft charges. That should be part of our regulatory machinery."

Source: http://www.publications.parliament.uk/pa/cm201011/cmselect/cmtreasy/uc612-ii/uc61202.htm

Now ask, perhaps the first of many questions - if the OFT deal with credit - who is the regulator for all the bank accounts that offer no credit - ie., basic bank accounts. Then think of how many bank charges may have been levied against such accounts and where was the regulator??? (Again - in our later discussions - I need to give you more evidence of how the FSA directly address unfair charges - and it is an eye-opener - and it would apply to basic bank accounts.).

Importantly for our later discussions - you will also find the question of "free banking" already on the agenda - see this extract - also from the above link to the TSC.

" ...Lord Turner: I think it probably is the case that free if in credit banking does create a bit of a barrier to new entrants, because it’s important to realise it is not just free if in credit, the current account in itself is probably for many customers loss making or marginally profitable. It is essentially a loss leader. It is just a classic loss leader, or at least low-return leader, which banks provide in order to get hold of a relationship on which they can then sell other products. There are two problems that follow from that. One is that because of that there is a desire for them to sell other products, including sometimes products that are not appropriate, and that is where we get some of the problems from aggressive selling, because they’re trying to make up for the low profitability of the core product. It is also the case that a loss leader product, almost by definition, makes it more difficult for new entrants to come in, because they can’t make profit just out of the core product. They have to immediately be able to cross-sell other products as well. The structure is probably something that tends to make it more difficult for new entrants to come into the market. There are other important barriers to new entrants, however, which I notice the OFT have also set out in their recent report."

So (with some added facts you need) - I can argue a case over basic bank account charges, but we also need to address the charges applied to overdrafts etc - what the OFT were attempting to do, and where the FSA said they had no jurisdiction - to do that we need to look at something that happened later - the Judicial Review over PPI - which has not been appealed - and it reveals two very interesting facts.

Start with these extracts (the source document is at the foot of these extracts) - and the FSA Principle that applies to "Treating Customers Fairly".

" ... An important consequence of contravention of a rule is provided for in s150 as follows:

"150. – Actions for damages.

(1) A contravention by an authorised person of a rule is actionable at the suit of a private person who suffers loss as a result of the contravention, subject

to the defences and other incidents applying to actions for breach of statutory duty.

(2) If rules so provide, subsection (1) does not apply to contravention of a specified provision of those rules."

S150(2) is significant in the case since the Principles are FSA rules but the FSA has provided that s150(1) does not apply to them. Other consequences which apply to contraventions of the rules, including Principles, are public censure under s205, and financial penalties under s206. Those consequences are appealable to the Upper Tier Tribunal. The FSA may also seek from the court an injunction to prevent repetition of a contravention, s380, or a restitution order where someone has profited from a contravention or another has suffered loss in consequence; ss382 and 384."

So we have an FSA rule to cater for the losses of individuals - but - the FSA have deliberately excluded the right of legal action by anyone if they have been treated unfairly!!! Yep, that is what the regulator did - it removed the right of all UK citizens to go to court if they have been treated unfairly - grossly or otherwise!!! ... Need more proof?

This extract:

" ...PRIN R3.4.4 contains the limitation permitted by s150(2), and states that:

"A contravention of the rules in PRIN does not give rise to a right of action by a private person under section 150 of the Act (and each of those rules is specified under s 150(2) of the Act as a provision giving rise to no such right of action)."

But - and it is crucial - what the ruling from the Judicial Review firmly established was that the FOS were in breach of their statutory duties if they reached their decisions on that basis (the basis used by the FSA) - that is why we have had the PPI compensation - not because of the FSA, but because of the FOS' statutory duties and that Judicial Review, and its decision was not appealed by the Banks.

Here are a few of the important relevant extracts from that JR:

" ... 76: All that the FSA decision under s150(2) does is to prevent a cause of action for breach of statutory duty arising in respect of the Principles; that is the only limitation on their role. That fact cannot make them irrelevant to the Ombudsman's duty to reach a decision as to what is fair and reasonable in all the circumstances of the case. Nor is there a justification for treating Principles, which cannot give rise to legal action, differently from those other relevant materials which by their nature cannot do so: regulators' guidance, codes of practice and good industry practice.

77: Indeed, it is my view that it would be a breach of statutory duty for the Ombudsman to reach a view on a case without taking the Principles into account in

deciding what would be fair and reasonable and what redress to afford. Even if no Principles had been produced by the FSA, the FOS would find it hard to fulfil its particular statutory duty without having regard to the sort of high level principles which find expression in the Principles, whoever formulated them. They are of the essence of what is fair and reasonable, subject to the argument about their relationship to specific rules."

Source: http://www.bailii.org/ew/cases/EWHC/Admin/2011/999.html

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Whether bank charges were fair or unfair - was, contrary to Lord Turner, a question never answered by the Supreme Court.

I hope the above extracts demonstrate that there is an answer - but it has never surfaced, or perhaps it has never been allowed to surface?

A shed load of money is involved - and the reputations of many important individuals.