Bank Charges case upheld

MarkyMarkD

Markshark

There has NOT been another case where the bank has submitted a written defence. The other cases have EITHER been settled out of court, OR the plaintiff has achieved a default judgement because no defence was submitted.



--- more wording to come ---

It's rather disappointing that we've got to post #192 and nobody has actually posted the wording of the claims involved or seems to have read the judgement - in fact, I don't think anyone has noticed that there were TWO cases against Lloyds TSB where Lloyds TSB won.

The full judgement is here: http://img.thisismoney.co.uk/docs/Summary.pdf.

The first plaintiff's claim in full is:

Lloyds TSB have made charges disproportionate to the work involved to them. I am therefore claiming back the charges and any interest and also the £10 subject access fee paid.

Is anyone surprised that a claim worded like that lost? It doesn't state what the basis of the claim is. It doesn't quote the contract terms referred to. It doesn't give anything like enough information for the judge to make a judgement.

The second plaintiff (the one that the BBC article is referring to) basically dug his own grave in the questioning by the judge. When he was given a number of circumstances which might lead to an unauthorised overdraft, he responded that he did not consider any of them represented a breach of contract. Hence any charges imposed in respect of those unauthorised overdrafts were not penalties for breach of contract, but service charges. And Lloyds TSB argued successfully that their charges were reasonable; the judge held that "reasonable" didn't mean "equalled cost".


The first case LTSB won doesn't prove anything, other than that some judges aren't prepared to uphold sloppily presented claims.

But the second case is very meaningful - it's a well reasoned judgement and I would expect it to be seen as relevant by other judges judging other similar cases.

The other interesting bit in the judgement is where the judge states that, if costs WERE relevant, it would be reasonable to consider the whole costs of running current accounts, not just the specific costs of unauthorised overdrafts. In other words, it is up to the contract how the cost of running the service is apportioned between "normal" and "unauthorised" transactions - and the banks have chosen, in the main, to offer "normal" transactions for free but to charge heavily for "unauthorised" transactions. The judge is saying that's fine.

HelpWhereIcan

Interesting points, just thought I would re-post my answer to the current thread on the Mortgages Board

http://forums.moneysavingexpert.com/showthread.html?t=453375

just to se how far out people think I am ;-)

homer_j wrote: »

Just read the judgement and from my understanding, this case was lost for one reason alone and that was the claimant did not prepare his case very well.

The claimant was asked to provide a full list of charges with dates and reasons. The claimant failed to do this so how could he argue his charges when he couldnt even prove to the court that these charges existed?

The claimants did not specify which accounts he was claiming for. How could this help - he has been very very sloppy. .

That was Mr Houghton whose approved judgement was recorded by the judge in the same 'return'.

The judge describes Mr Berwick as having prepared and argued his case very well and even as a 'model litigant.'

homer_j wrote: »

This was no victory for proving whether the charges are legal or not, it was a lesson in making sure that you know what you are claiming for and why.

Not as I read it. The judge addresses both the unfair penalties for breach of contract

the customer may make or authorise whatever requests for payment out of his account he wishes; the bank is obliged to honour these requests insofar as there are sufficient funds in the account (or within any overdraft facility it has contracted to allow the customer) and it is free to accept or decline the request in any other case. If the bank accepts the request it is entitled to debit the customer's account and (to the extent that payment causes or increases an overdraft) in due course to be repaid by the customer for what it has paid out on his behalf. If the bank declines to accept the request it is not in breach of contract to the customer for having done so and nor is the customer in breach of contract having made the request in the first place.

It follows my judgement that none of the charges complained of were imposed by reason of breach of contract on Mr Berwick's part. It follows also that the law relating to penalties and liquidated damages, which applies only to sums stipulated for payment in circumstances of breach of contract , has no application to those charges

...the position is materially different between a case such as this... and those which involve credit cards. In the operation of credit card accounts, the customer is typically under an obligation to make a minimum payment to his account each month and may also be under an express obligation to ensure that the total amount he charges to his account does not cause a limit to be exceeded. If he is in breach of either of these obligations, any charge provided for by the terms of his contract is potentially susceptible to the argument that it is a penalty

and Unfair contracts terms act 1977

neither of these sections is of relevance. They would apply, potentially, to any term of the contract between Mr Berwick and the bank made on the bank's standard terms which purported to exclude liability on the bank's part for breach of contract by it, or to impose liability on Mr Berwick to indemnify the bank for any liability incurred by the bank in negligence or breach of contract

and Section 15, Supply of Goods and Services Act 1982

His judgement on that part of the claim is best read in full, but (as I read it) basically says that the banks do not charge for all of the services that they provide and that in order to prove the charges are unfair, the amount of the charges made in these cases would have to be weighed up against the COST of providing ALL account services (including holding and securing the money) and the TOTAL CHARGES made for ALL services.

He also seems to go on to say that the act does not prevent a profit being made and therefore does not apply as the charges made by Lloyds TSB are not significantly different from those made by other banks, making the charge reasonable.

Very interesting in my opinion.

Compound_2

HelpWhereIcan wrote: »

Section 15, Supply of Goods and Services Act 1982

His judgement on that part of the claim is best read in full, but (as I read it) basically says that the banks do not charge for all of the services that they provide and that in order to prove the charges are unfair, the amount of the charges made in these cases would have to be weighed up against the COST of providing ALL account services (including holding and securing the money) and the TOTAL CHARGES made for ALL services.

Banks recover their costs and make profit by lending out their customers' money at high rates, while paying customers little or no interest.

tezl

how can the judge exspect the claimant to prove how much a charge should be if the bank is not there to be questioned.he says that charges are high to cover the costs of other parts of banking eg..., statments cheue books, in that case every one should pay not just overdrawn people.he says that banks need to make profits somehow , they do in payingpaltry interest rates .

OllyB

My two penny worth (sorry, many pennies!) to several of those posters who either are lucky enough to not have been charged or consider going over their overdraft limit as "stealing" (irrespective of what point of law/moral view that you have).

As Judge Cooke himself mentioned in his judgement of today's case (Section 20-22) (http://news.bbc.co.uk/.../15_05_07_bank_charge.pdf)

20. This is not a straightforward matter. There may be for instance considerable delay in relation to payments both into and out of the account before they are cleared.
[cut]

22 It is obvious from the above [section 20 & 21] that the customer will typically not know the exact state of his account balance at any point in time

ie I can write a cheque for some amount, knowing I have the funds available in my account now and possibly for a couple of weeks ahead. But the cheque could be presented at any time up to 3 months from the cheque's date (which may not be the time of writing), which is out of my control; and quite possibly I may not have the funds available then.

Banks do make mistakes (it IS possible!), or not do as they say. Eg, I paid a large credit card balance via my debit card once, having made sure the debit card account had enough funds in. One of either bank (nobody admitted liability) double charged me the transaction, plunging my account several thousands into the red. First thing I knew about it was when I couldn't use my card to buy things (which "should" have had enough money in). Spent all day on phone to both banks trying to get them to sort it out (they did eventually). As several direct debits where due in that day, my bank charged me a total £200 in returned D/debit charges when they knew full well that there was an issue with my account (1 charge for each D/D returned). Had to then spend more time on the phone to get charges refunded after waiting a couple days for bank to have the decency to refund - they did, but took 4 days to refund, when charges where debited from my account instantly.

What about my opportunity to charge costs in sorting the mess out, none of which was my fault at all?

Another bank, after stating very plainly on their application form and other literature that they required a £50 opening balance [business account - different legal position, but no other difference]; did not transfer stated £50 from the account details which I provided. I spent a quid on the debit card setting up a paypal account on the account before first statement or internet access was provided. Result - £15 unauthorised overdraft charge for £-1 balance, instead of expected balance of £49. [am still waiting for bank's request to refund charges].

My own view is that for a "fair" system, banks should make reasonable attempts to contact you first to see if there are any specific reasons why the account is over the overdraft/permitted limit. A charge should only be made if the account owner cannot provide reasonable grounds as to why the account is in default, or bring the account back to acceptable levels within a reasonable time period. Although there may be differences of opinion as to "reasonable grounds" (OFT/Financial Ombudsman ruling required?), at least the banks can show that that they have charged taking all circumstances into account, and provide a justification for the level of charges.

Also only one charge should be made for, say a day's worth of returned D/Ds, cheques, over the overdraft limit transactions etc to prevent charges spiralling out of control

tezl

sorry mate did not read yours before typing

shagtasticshaz

WiseInvestor wrote: »

At last a commonsense post on this thread!!

I'm firmly with Lloyds TSB on this one - the customer broke his contract and effectively STOLE from the bank by using an unauthorised overdraft! If I miss a mortgage payment I run the risk of my house being taken off me - is that a reasonable charge or a penalty?

For all those people who go into the red without asking permission first, I think you deserve to be penalised. Meanwhile, those of us who take care of our finances (and I'm not well off by any means!) risk being charged for everyday banking services like cheques and cash withdrawals as is the case in many other countries, simply to fund those who can't be trusted to tie their own shoelaces properly!

Running a Current Account should not be taken lightly, yet many people believe they can do as they please and shouldn't be penalised for stealing.

WELL DONE LLOYDS TSB!

The point you seem to be missing here is that its the AMOUNT of charge made when going into unauthorised overdraft is in dispute, charging £30 for going 10p overdrawn...or rather 'stealing' 10p from the bank as you put it...hardly warrants a £30 penalty!

Who are you to sit high and mighty in judgement of people who slip into an overdraft for reasons qiute often not in their control....Do you think people WANT to be in that position?

How ignorant


must go now and attempt to tie up my wayward shoelaces!

scotswoman_3

Hi there,

I didn't get that defense myself however from reading posts on the consumer action group website I understand that this is one of the standard defense's submitted from Cobbetts.

If you have filed your claim via MCOL you may not have had enough space to attach details of the charges claimed, which may be where their reference of embarrassment comes from. Thus when the court served the claim to the solicitors there would have been no schedule of charges. Even if you have submitted schedule of charges to the bank prior to this I believe you need to send a copy to the solicitors. I sent a copy to the solicitors and copied it to the court (it was later than it should probably have been to the solicitors - was after I received their defence directly from Cobbetts,I sent a copy to the court.) I was able to e-mail them - in fact I e-mailed, faxed and posted a hard copy to both court and solicitors just to be on the safe side!

I believe Martin referrs people to the Consumer Action Group for more indepth details once they get to the court stage - this is how I found out about the website.

I am a regular visitor to both this site and the consumer action group. There is so much information and different threads (on both sites) which initially can be quite daunting to get your head around especially when you are trying desperately not to miss anything. Its amazing the information, guidance and support that you can get from these sites.

I also think that when you have been involved in this process for some it can be very addictive and some people can become very knowledgable very quickly. I think its very easy to lose sight of how intimidating for some this process is especially for those people who have not been involved in any legal process before. I guess my point to people who are involved in this process is that regardless of whether you have just started the journey or are nearing the end. Please do not hesitate to post a question on either site no question is silly - there will always be someone who is more than happy to share his/her experience with you. That is what I believe both website's aim to do, share experiences, information, guide people though this process feeling supported and most importantly not alone!

Good Luck - I'm a bit further on than you - submitted allocation questionnaire last week to which I attached a draft order for directions - new strategy for allocation questionnaires from the Consumer Action Group site.

Now its time to prepare my court bundle - Luckily I have documentation that clearly states that the overdraft must not be exceeded so I will be including that in my bundle along with any other terms and conditions I can lay my hands on. So fingers crossed the judge rules that in this case it is a breach of the contract and the charges are not proportionate - Natwest don't even send out an automated letter - I believe they send out one and then no more ever.

I am going through this process for my mother who is a pensioner on a limited income who unfortunately due to her limited income, failing memory and misunderstanding of how banks actually work found herself a specific periods over the past six years paying very large amounts of charges. The bank was very helpful though - it gave her an overdraft and one loan followed by another top up loan.

My mother being a very proud woman and independent woman it was only by chance that I discovered this at the end of last year. When I went through the charges there was one particular month that the charges just fell short of the income she had coming in for that month - the Natwest unlike other banks deduct the charge immediately and do not inform you of this. So unless you are able to check your bank account each day this is very tricky. Especially for those on a low income or who are disabled.

So now I have myself down as a third party to the account, have all my mothers direct debits and standing orders etc coming out of my own bank account (as I have more funds going in a payment coming out early doesn't affect my accoun) and have set up internet banking in order for me to be able to monitor her account (although less of a need now I have stopped DD's etc). What has this done for my mother? Disempowered her - she feels that she is now the child and I'm the mother. It is a recent thing and once the effect of all these charges has gone we can get things back to normal and she can be in control of these payments herself. We've set up another bank account (internet banking) for her with my bank so that if I need to
transfer funds immediately I can do so - seems to be working well.

My mother would never have been able to get through the first stage of going through the bank statements - which took my 3 hours to decipher what was a claimable charge and what wasn't. How many other vulnerable disabled people are out there who don't have anyone to support them through processes like this? It makes me mad!

Sorry this was supposed to be a quick reply! Guess I was on a roll! Don't normally post then once I do there's no stopping me!

scotswoman_3

Sorry the above post is in response to post 172 on page 7 - not got the hang of posting obviously!

pigginsexy

Hendrix_lennon wrote: »

sounds like the judge's personal feelings over the legitemacy of the charges has clouded his view.
wouldn't be surprised if the ruling is over turned.
It's certainly not putting me off.

Or he is a shareholder. Dont forget that some of these Judges sit on the main board of banks as shareholders!!!!!!!!. My uncle who is a Judge at the high court is also a 32% shareholder with Birmingham Midshires. He goes to every board meeting and has the right to vote!

Maybe this judge is in the same position??????

I am not being put off, i have a court date with Natwest on 14th August. The only thing that niggles me is that i am having to wait so long.....

Good luck to all and keep going