What impact will the OFT have?

MSE_Martin

UPDATE 29 MARCH 2007
THE OFT HAS NOW MADE A PROVISIONAL ANNOUNCEMENT

read the OFT announcement on bank charges

I HAVE THEREFORE CLOSED THIS THREAD TO ALLOW DISCUSSION TO CONTINUE THERE

I've read a few questions on the boards, so I thought I would lay out some notes on my best guess. The OFT opinion is due towards the end of March, but may fall back until the first few days in April.

FIRST THE IMPACT OF THE EXPECTED OFT ANNOUNCEMENT

I know many people are worried about the impact, and quite rightly so. Let me clarify a few things. I believe you are better to reclaim now, but by no means does this mean that you won't be able to claim after the OFT announcement.

What is likely to happen

1. New Bank Charges Dropped.

The OFT is likely to opine that it won't investigate bank charges over a certain amount - (probably £12 - £15). While it's not a ruling, this has probably been done after talks and compromises with the banks, so they will probably drop their charges to this level.

2. Banks will automatically give the difference bank on request.

From this point on, if you request a reclaim of six years charges, you are likely to automatically get back the difference between what you were charged and the new charges. E.g £35 - £15 per charge.

3. Getting ALL your money back WITHOUT going to court will be more difficult.

Because of the above situation, the banks are less likely to settle for the whole amount without more force, as they will argue that there is a settlement with the OFT.

My personal belief is the correct amount is the difference between what you were asked for and around fiver (ie £35 - £5) which is a rough compromise figure on what the charges do cost the banks.

Yet with the OFT backing, the banks are likely to stick it out for more on this, making you have to take them to the small claims court to get the full amount back.

SUMMARY SO FAR.

Just to summarise, this all means, after the OFT ruling you are MORE likely to get some money back without a fight, but LESS likely to get all your money back without a fight.

The Impact on Reclaiming In Court

If you reclaim in court, the OFT ruling does not directly impact (in fact the OFT doesn't rule it just gives an opinion, though it carries a lot of weight). You can still take the banks to court and ask for all your money back, and it's very likely that you will still get it. Yet there is a slight increase in the risk that some bank will decide to defend, citing the OFT opinion as a strong weight - but its difficult to predict that.

Then why is it CLAIM NOW!

Simple: you've a better chance of getting most/all of your money back with less hassle by acting now. Though it doesn't stop reclaiming, even if you don't do it now.

SHOULD YOU ASK FOR THE WHOLE AMOUNT IF ITS OVER £5,000?

I know there's been some confusion around my info on that. So I've slightly redrafted the article to clear it up. This isn't a change, more of a clarification as requested. The key is that if your case is heard in the small claims court you cannot have costs awarded against you. I've expanded on the relevant paragraph in the article and this is it.

"Small claims in England and Wales are cases under £5,000, that’s before any statutory interest is added. Try to keep claims below this if possible, either by making separate claim for each different account with the same bank, or if you're just a few hundred above the limit you may want to consider lowering the asking amount down to £5,000 (even if your earlier letters demanded more) to minimise the risk.

"Yet even if your claim is much bigger for just one account, and you don't qualify for the small claims court, don't let this unduly put you off. No one has lost yet, you can still go for it, though if this concerns you, you may want to consider seeking legal help. (see later)."

I hope this is useful

Martin

UPDATE NOTE: 4 March 2007. Article on Bank Charges and the OFT

I'd written a short piece to go alongside the News of the World's reporting a leak on the OFT report (there doesn't seem to be a web link, please let me know if you find one). As my piece was eventually incorporated into the main article, I'd include it in full here (though of course it's slightly different to my normal writing style as it was specifically for the NOTW).

"It’s like someone slapping you across the face while they pat you on the back! Angry bank customers may rightfully cheer that the mighty OFT thinks the banks have robbed us; but this toothless tiger may make this worse rather than better for some.

The Money Should Be Given Back Automatically without Question

Assuming the banks wilt and follow its opinion, they’ll start paying back SOME of bank charge cash they’ve unfairly grabbed, but only if asked. This is out of order. Breach banks’ rules and disgustingly they suck cash straight from our accounts, without letting us dispute it; no other type of company has this dangerous dark power. So it’s shameful that while they’ve unlawfully grabbed our money, without ever asking, we will have to ask to get it back. It outrageous and means many £billions will stay in their coffers.

I’m very proud that 1,500,000 template letters have been downloaded from my website to bully-back the banks over the last few months, with many getting £1000s back. Yet what about those without web access, the illiterate or innumerate, or those with mental health issues, large numbers of whom have tragic massive debts? The banks don’t care who they profit from, so why should they escape giving it back to all?

The OFT doesn’t have the power. But politicians do. Are they listening? I say get up off your green benches and stop the banks earning out of apathy, ignorance and confusion. Make ‘em automatically give every unlawfully taken penny back.

What will the magic number be?

Yet there’s another nasty shock. Up until now, everyone who pushes hard has got all their bank account penalty charges back, often without the need to go to Court. There’s a risk the OFT’s opinion will make this less likely. Remember, this isn’t about bank charges being wrong, but that they’re too high. In the UK, you’re not allowed to fine people for breaching contract, but you can recoup costs.

Yet, go beyond your overdraft limit or bounce a cheque/direct debit and does it really cost a bank 35 quid each and every time for its computers to print off an automated letter, stuff it in an envelope and post it? Of course not! The Professor of Banking who investigated it says even taking ‘structural costs’ into account, it’s at most £4.50.

Don’t expect the OFT to say the same though, it has been talking to the banks and wants their co-operation, so they’ll agree, when asked, to pay back some of the cash without a fight. And that means a compromise; last year when it talked about credit cards charges it said £12, but rumours are the banks big buck arguments may’ve swayed it upwards to around £15, so follow the OFT’s route you’ll probably only get half your cash back.

Let me fire a warning shot at the banks… this type of compromise figure ain’t on. The OFT doesn’t rule the Courts, so people can still fight you there, just as many have done since the credit card charge opinion. If the figure set is too high, this can and will happen and you'll find yourself losing in court just like you do now.

Charges should be set around a fiver and past charges should all be automatically refunded, except for a fiver per charge. Banks can afford it. They’re likely to have grasped £38 billion profits this year. This is astonishing: it’s more money than adding 10p to the rate of income tax would earn. This year’s profit increase alone is £5 billion. So this bunch of bankers can afford to give back the massive £1.7 billion per year they’ve stolen in charges.

If you’ve had bank charges, reclaim right now, before this is announced, the sooner the better."

Read the full Step-by-Step Guide to Bank Charges: How to Reclaim them

jamalfatty

I'd agree with most of the above, but think your still just as likely to get all your charges back just as easily. The credit card companies have had there charges reduced for a while now and still cough up full amounts in end so dont see why banks would be any different.

MSE_Martin

The reason Jamalfatty is while the credit card announcement was the OFT in a less high profile light. My sources tell me the bank charge opinion will be a compromise with the banks, and thus its quite possible we'll see automated reclaim systems set up; which didn't happen with credit card charges. And that if you're trying to go round that, the banks will push back with more force.

It's also worth remembering that the link between CC charges and Bank charges, meant that the banks fighting it in court court risk a ruling on Bank charges with a read across, yet now both are in the open changing the game.

jamalfatty

Point taken. However, regardless of what the OFT says, think it will still be up to the banks to demonstrate in court that it actually does cost them £12 or whatever the OFT set the charge at. We all know this is not going to happen as it is still way above what it costs them, dont see any reason therefore not to push for all charges.
Can see how many more people might back down though before it got to court stage.

piranhalikethat

Does this mean I'll have more chance at being refunded the difference between the new charge, or being refunded the difference to what it actually costs them? (which is what I am going for)

jamalfatty

piranhalikethat wrote:

Does this mean I'll have more chance at being refunded the difference between the new charge, or being refunded the difference to what it actually costs them? (which is what I am going for)

They wont ever refund you the difference between what they charge you and what it actually costs them, as this would tell us how much it actually costs and open the floodgates to financial ruin for them

Twinkly

piranhalikethat wrote:

Does this mean I'll have more chance at being refunded the difference between the new charge, or being refunded the difference to what it actually costs them? (which is what I am going for)

It means you will have more chance of a quick settlement based on the difference between the charges and the OFT suggestion. The banks will try and use the figure as a fact of law, which it isnt, in trying to get you to back down.

For a better settlement the chances remain the same as before so stick to your guns.

Good luck

piranhalikethat

Will do

Thanks a lot

SurefireMJ2040

I think that the key thing to remember is that banks do not want to be placed in a position whereby they have to justify & disclose the true cost of the charges in a court of law.

I would bet money that there will be a small test case first with some powerful hot-shot lawyers representing the bank(s) to try an set a precedent and win in court, citing the OFT ruling to defend their claim.

Still, anyone who is still in limbo about whether to settle for a lower amount . . . I say, tell the bank NO DEAL!

CLAIM ON!

krisskross

What will happen if someone decides to carry on to court for the full amount although the bank has offered the difference after the OFT decision. The bank defends and wins. Who pays the court costs and how much are they likely to be?

jamalfatty

krisskross wrote:

What will happen if someone decides to carry on to court for the full amount although the bank has offered the difference after the OFT decision. The bank defends and wins. Who pays the court costs and how much are they likely to be?

This is about as likely as paul scholes getting a nobel peace prize.

Costs arent awarded if its on small claims track which is why it is recommended to keep claims below £5k