Bank Charges OFT Test Case Discussion

Stokey125

Nathan_Spleen wrote: »

To:
Nathan Spleen

From:
Natalie Baylis
Legal Advisor
General Council's Division
Financial Services Authority

cc. Laura Derby Chief Executive Office FSA

cc Simone Ferreira General Council's Division FSA

17 September 2007

Dear Mr Spleen

COMPLAINTS HANDLING WAIVER: PROPOSED JUDICIAL REVIEW PROCEEDINGS

Thank you for your letter of 2 September about your proposed Judicial Review proceedings in relation to the complaints handling waiver issued on 27 July. Mr Sants has asked me to respond to your letter as it concerns proposed legal proceedings against FSA.

You have asked why the complaints handling waiver has been introduced, and you have said that you are dissatisfied with the answers you have received to that question from the FSA to date. I will try to provide you with as full an answer as I can to your question. I am afraid however that this will involve some repetition of points that have been made to you in correspondence so far, as the FSA's position has not changed from that set out to you in our initial replies.

The complaints handling waiver was introduced, after careful consideration by the FSA Board, under section 148 of the Financial Services and Markets Act 2000. The background to the decision has already been set out to you in e-mail correspondence, but is central to why the waiver was introduced and so I will set it out here.

For some time customers of banks and building societies have been complaining about the charges levied in relation to unauthorised overdrafts. The legal uncertainty about whether the charges were lawful or fair meant that complaints made by customers were being determined, but with inconsistant
outcomes for customers. Some customers were successful but others with similar complaints were not.

In September 2006 the Office of Fair Trading announced that it would undertake an investigation into the fairness or otherwise of certain terms in current account agreements. Since then there has been a significant increase in the number of claims made by customers against banks and building societies in relation to these charges, and in complaints and claims taken to the Financial Ombudsman Service
and to the courts.

The FSA considered that it was desirable for there to be further clarity as to how these complaints should be handled fairly and consistantly, by obtaining greater legal certaincy or otherwise.

The FSA was also concerned. following the results of thematic work that it undertook to access the extent to which firms were complying with the complaints handling rules in dealing with complaints about unauthorised overdraft charges, that there were significant deficiencies and important areas of weakness to their approach to handling these complaints.

At the end of July the OFT and certain banks announced an agreement to start a 'test case' in the high court for a declaration to resolve the legal uncertianties concerning the level, fairness and lawfulness of unauthorised overdraft charges.

In view of those developments, the FSA considered that it was not in the interests of consumers for complaints to continue to be dealt with inconsistancy by firms while the test case was still proceeding through the courts. Once the test case is resolved it is expected to give greater legal certainty in this area and to enable complaints about these charges to be handled fairly, consistantly and promptly
in the light of that greater certainty.

After careful consideration by the Board, the FSA decided to grant the complaints handling waiver to current account providers who consented to it's conditions. The vasr majority in terms of number and market share have done so.

The main effect of the waiver is to waive the rules that specify time limits for dealing with any complaint about the level, fairness or lawfulness of unauthorised overdraft charges. This means that the banks and building societies will not have to deal with these complaints within the normal time periods required by our rules. The waiver does not prevent customers from making complaints whilst it is in place, and firms with the waiver are required to log these complaints to be dealt with on resolution of the test case.

You have asked for information to satisfy you that the waiver is genuinely in the interests of consumers. I hope that the background to and the reasons for the decision which I have set out go some way to answering your question.In addition the waiver has a significant number of other safeguards built into it, in the form of conditions applying to the firms, which are designed to protect consumers.

I have enclosed a copy of the waiver direction with this letter for your information:

A Conditions (1), (2) and (3) in prargraph 12 are designed to ensure that customers and complainants are kept appropriately updated about the course of the test case, the waiver and there implications.

B Condition (4) relates to the procedure that banks and building societies must follow where they have made an offer to a customer to settle a complaint which has not yet been accepted.

C Under conditions (5) and (6) firms must keep records of complaints received and preserve records of current accounts so that they remain available for the consideration of existing and future complaints.

D Conditions (7) and ( make requirements on firms which are parties to the test case in relation to their conduct to the case.

E Condition (9) requires all firms to update the FSA about stays of relevant court proceedings obtained.

F Conditions (10) to (15) relate to the handling of complaints by firms during and after resolution of the test case. One important protection for consumers whose complaints relate to financial hardship. Condition (10) requires firms to ensure that complaints relating to financial hardship (and others which are not relevant to the waiver) are identified and progressed promptly in compliance with normal rules and timescales in the Disputes resolution: Complaints manual of the FSA
Handbook.

G Condition (12) prevents firms from taking into account the time period of the waiver to rely on a 'limitation' or time limit defence to a subsequent complaint by a customer.

H Condition (14) prevents a firm from seeking 'full and final settlement' of a complaint during the life of the waiver.

I Conditions (11) and (15) require firms to handle complaints effectively and swiftly and in accordance with the principles established by the test caseafter it has been resolved.

Finally, the waiver is of limited duration: it will end when the test case has been resolved or at the end of one year if earlier, and in addition the FSA may revoke the waiver at any time if the criteria for the waiver are no longer satisfied. The guidance in the waiver direction (paragraph 7) sets out the approach that the FSA intends to take to the planned review of the waiver at the end of September, to considering renewal of the waiver after a year and to reviewing continuing satisfaction of the criteria for the waiver throughout its duration.

You have also asked for information to satisfy you that the waiver is neccesary to facilitate the OFT's test case which is one of the reasons for the waiver set out in the press release and in information about the waiver on the FSA website. The waiver will facilitate the test case in that it will allow the test case to proceed ahead of the other outstanding (and future) complaints about these charges. Once the case is resolved it will then provide some legal certaincy against which those complaints can be judged, which should result in fairness and consistancy between the outcomes of those complaints.

We acknowledge that our decision will lead to inconvenience and delay for some consumers - particularly those who were in the advanced stages of making a claim - in that their complaint will now not be resolved for some time. However we are clear that, bearing in mind the background against which our decision was made, and the conditions which are contained in the waiver, it is in the broader interests of all consumers in the longer term.

I hope you have found the information in this letterhelpful. It is a matter for you whether you still wish to challenge the FSA's decision by way of Judicial Review. We fully reserve the FSA's position in relation to any proceedings you may choose to bring. Should you decide to do so, however, you should be aware that it is our policy to recover from a claimant our costs of defending an action if unsuccessful legal proceedings are brought against us.

Yours sincerely

Natalie Baylis

I am puzzled as the banks where not complying with the complaint handling rules prior to the waiver what made the FSA think that the banks will comply with the conditions of the waiver. As the banks have been ignoring the conditions of the waiver when it suits them the FSA's faith in the integrity of the banks was clearly misplaced.

The FSA seem to be ignorant of the narrow issue of the OFT case it will not deal with the level of charges nor there lawfulness. The waiver therefore seems to be based on a flase premise.

Nathan_Spleen

Hector Sants
Chief Executive
Financial Services Authority
25 The North Colonnade
Canary Wharf
London
E14 5HS





cc. Clive Briualt Managing Director FSA
cc. Natalie Baylis Legal Adviser FSA
cc. Rt Hon John McFall MP Chairman Treasury Select Committee


By letter & e-mail


19 September 2007



Dear Mr Sants

Proposed Judicial Review Proceedings

I refer to Ms Baylis's letter of 17 September. At 4 pages in length and with virtually no substance whatsoever, I certainly appreciate the effort and creativity expended in crafting it but I remain seriously dissatisfied with the response.

Let me remind you of the 2 questions I asked in my initial letter and Ms Baylis's response:

Q Why was the waiver necessary to facilitate the test case?

A 'The waiver will facilitate the test case in that it will allow the test case to proceed ahead of the other outstanding (and future) complaints about these charges.'

This response is meaningless. Outstanding and future complaints will have no bearing on the test case itself. Indeed the OFT case seeks only to establish a very narrow issue and will not, as Ms Baylis claims, deal with the lawfulness or fairness of the charges. The OFT has made this very clear. Also, the OFT has recently stated that the test case, although scheduled to be heard next year, is by no means certain to proceed at all, "If we do our own financial analysis, and they [the banks] come in with a number that is lower than our analysis would suggest is an unfair charge, there is no need for the court case to go forward". I am of course aware that the FSA can only introduce a waiver scheme as a result of it being requested by firms.

So the situation is thus: Banks have successfully requested the waiver on the premise that a future test case might proceed, dependent on an issue which is entirely within the banks control.

I have been assured by the OFT that the FSA not only offered no reasons whatsoever as to why the waiver should be introduced but have categorically stated that the waiver has no facilitary value to it's case.

Q Could you satisfy me that the waiver is genuinely in the interests of all consumer?

A Ms Baylis's response is astonishing. It simply 'sets out the background' to the test case but does not provide an answer.

The contention that ''some customers were successful but others with similar complaints were not'' couldn‘t be more misleading. The FOS have a 100 percent success record in upholding these complaints and of the many tens of thousands of court cases dealing with claims, defeats can be counted on the fingers of one hand. And so to suggest otherwise and then use this as the basis for introducing the waiver as a means to 'protect' consumers is laughable.

The FSA's repeated claims that the waiver ''has a significant number of other safeguards built into it'' is a area of particular concern. Most of these waiver ''safeguards'' are simply reminders of the FSA's own general rules that are already in place , regardless of the fact that all of the 'safeguards' are entirely dependent on the integrity of the banks - whose very integrity in fact, the FSA has voiced such grave doubts about as highlighted in the report on it's thematic work and letter to CEO's on the subject of complaints against these charges. I am amassing a growing amount of evidence that the conditions of the waiver are being routinely flouted, especially in cases of financial hardship.

As both these questions have not been answered to my satisfaction I would like to give youa final opportunity to answer them. Also, in the light of recent events since my original letter I wish to put 2 additional questions to the FSA:

1) Was the FSA aware, at the time the waiver was introduced, that the OFT would abandon the test case if a level of charge was agreed in the meantime and if not, can the FSA justify that the waiver should remain in place if the test case it is meant to facilitate is not at all certain to take place.

2) What mechanism does the FSA have in place to monitor if the conditions of the waiver are being met, which are due to be considered in it's 2 month review.

Finally I would like to make it absolutely clear to the FSA that if these questions are not answered to my satisfaction or that the complaints handling waiver is not revoked by the 2 month review date, I fully intend to commence Judicial Review proceedings against the FSA.


Yours sincerely

Nathan Spleen

rmcroydon

Help - please. Several months ago I started a claim via the courts on-line service. Abbey said they'd be defending it and I was given a court date of 25 Sep. I assumed that date would be postponed as a result of the test case announcement. I also assumed that because of a general letter from Abbey (sent to all claimants, I imagine) saying that things would have to wait until after the hearing.

However, I've just phoned the court to check and was surprised to be told that their judges are continuing with cases. The problem is that the papers I was sent giving me a court date said that I must submit to the court and Abbey any papers that I intend to rely on at least 14 days before the hearing. As my claim was on-line I don't think I've ever submitted my statements that have the individual charges highlighted and totalled.

Will this be a problem? Should I have sent this to the court

Stokey125

rmcroydon wrote: »

Help - please. Several months ago I started a claim via the courts on-line service. Abbey said they'd be defending it and I was given a court date of 25 Sep. I assumed that date would be postponed as a result of the test case announcement. I also assumed that because of a general letter from Abbey (sent to all claimants, I imagine) saying that things would have to wait until after the hearing.

However, I've just phoned the court to check and was surprised to be told that their judges are continuing with cases. The problem is that the papers I was sent giving me a court date said that I must submit to the court and Abbey any papers that I intend to rely on at least 14 days before the hearing. As my claim was on-line I don't think I've ever submitted my statements that have the individual charges highlighted and totalled.

Will this be a problem? Should I have sent this to the court

All is not lost put all your papers together and send them off by special delivery to teh court and to Abbey. Also make sure that you have prepared representations against a stay being granted. Whern you get to the court apologise to the court for not sending the documents earlier but explain why you thought teh matter had been on hold show the letter from Abbey to the court. This is to stop them objecting as they are partly responsible. Do not forget to send any cases you are relying on. You may wish to download the particualrs of claim for teh test case from the oFT website to show how linited the case bought by the oFT is.


If the case goes ahead and you get a judgment on the merits can you ask the judge for a transcript at public expense.

JonB585

As a HSBC customer I am still being charged for going over overdraft limit and returned direct debits. Though more recently when this happens I receive a telephone call on my mobile from a foreign call centre asking to confirm security questions, I always refuse as this completely goes against any identity fraud prevention giving legitimacy to the fraudsters, though when I call HSBC telephone banking it is confirmed that it was them. They never used to do this in the past and I believe that this is an exercise to build up evidence that this is not just an automated process but an expensive one that justifies their fees. How do we get HSBC in to trouble for blatantly going against fraud prevention and giving phishing fraudsters legitimacy? Is it worth passing on this note of a change of tactic to those who will be fighting the OFT case as surely HSBC will claim an increase in costs, if its worth it how would I do that?

Hope this is in the right place, being new to this forum I am suffering info overload.

all the best

Jon B

JonB585

As a HSBC customer I am still being charged for going over overdraft limit and returned direct debits. Though more recently when this happens I receive a telephone call on my mobile from a foreign call centre asking to confirm security questions, I always refuse as this completely goes against any identity fraud prevention giving legitimacy to the fraudsters, though when I call HSBC telephone banking it is confirmed that it was them. They never used to do this in the past and I believe that this is an exercise to build up evidence that this is not just an automated process but an expensive one that justifies their fees. How do we get HSBC in to trouble for blatantly going against fraud prevention and giving phishing fraudsters legitimacy? Is it worth passing on this note of a change of tactic to those who will be fighting the OFT case as surely HSBC will claim an increase in costs, if its worth it how would I do that?

Hope this is in the right place, being new to this forum I am suffering info overload.

all the best

Jon B

bekster

Hi, I would like to know how you stand if you think the bank has dragged its feet in getting statements to you, so you could have put in a claim (& possibly received your charges back) way before this 'stay' took effect.

FOR EXAMPLE- You write to the bank asking for copies of your statements/default charges on 10th May 2007(clearing stating that this must be received within 40days), you receive nothing, you make 2 phonecalls one on 2nd July & a further one on 3rd August requesting the information. Finally statements appear, you put in your claim only to be told that they aren't going to deal with it because of their legal proceedings! :mad: :mad: :mad:

Surely this isn't acceptable & i do believe that they have purposely dragged their feet in sending out the information because of the impending legal proceedings.

How would this fair in court if i was to proceed?

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creditcardjunkies

creditcardjunkies wrote: »

I already had a small claim in the court process (scotland) when the OFT decided to freeze all bank claims. But barclays never put in a defence or got in touch with court what so ever, so the sheriff granted decree to me and summoned barclays to pay full amount with interest.

This was summoned by a sheriff officer on the 3/9/07, and they were given 14 days to pay. This time will be up on monday, I still haven't recieved any payment or acknowledgement from Barclays.

I'm just wondering what will happen next, because surley the sheriff officer cant arrest their wages or take items worth that amount .....can they??:eek:

Any advice would be great thanks

Hi just an update on my situation. The 14 days was up on monday past(17/09) but unfortunately Barclays did not pay. I went back to the Sheriff Officer and he is very unsure of his next step as it is a big company. He doesn't know whether he can go for an attachment?? So as it stands I am no where nearer getting my money!

Someone mentioned I may get a cheque, but I just dont think the Sheriff officer I have chosen knows just quite how to deal with such a case! :mad:

Oh well I will sit by the phone waiting on his responce

Abelardina

Hi

I've submitted a claim for my overdraft charges and am now also waiting for the OFT resolution. Before I did so, I opened a new bank a/c (as recommended by Martin) and I'm now unsure what to do.

Could I risk loosing my claim with First Direct if I close down my a/c with them and move to my new bank? Should I keep the account, but not deposit any money (if so I think I would be charged £10 per month for the type of a/c I have)? Or keep and use as I have to date?

I would love to switch bank as I'm no longer happy with First Direct and have found a much better deal with Alliance Leicester (from this site!), but at the same time don't want to risk my claim.

Any thoughts or advise would be much appreicated. Thanks, A.

no1mum_2

I put in my claim for my bank charges in June 2007 - I got a letter in early August informing me of this hold. Considering the important day was July 27th should my claim have been dealt with anyway as it was at least a month before the deadline?