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Judge rejects more bank claims
250 cases were settled in Leeds Mercantile Court this week
A judge in Birmingham has rejected two more claims by bank customers for the return of "unfair" overdraft charges.
Judge Cooke ruled that the two, both customers of Lloyds TSB, had not broken their contracts with the bank when going overdrawn without permission.
As a result the charges could not be penalties and so could not be illegal.
In May, Judge Cooke employed a similar argument when he became the first judge in the country to rule in favour of a bank facing this sort of claim.
That was also in favour of Lloyds TSB.
This latest decision highlights the increasing uncertainty surrounding how different district and county court judges approach bank overdraft claims.
Next week a judge in Hull will attempt to strike out more than 40 claims, relying in part on some of the arguments laid out by Judge Cooke in his first decision last month.
Other judges have dismissed the banks' defences almost out of hand and find almost automatically in favour of claimants.
Common law
To claim that a penalty charge is unfair, claimants may have to show that their contract with their bank actually prohibits them going overdrawn on their accounts without permission.
If the contract does not state this, then any charge incurred while being in the red may simply be a fee for a service, rather than a penalty.
Judge Cooke came to his latest decisions after asking the claimants if they thought they had in fact been in breach of their contracts.
There are no grounds that I can find that you were in breach of contract 
Judge Cooke
When they answered that they did not think so, he said: "The charges are a penalty at common law. Customers need to be in breach of contract.
"There are no grounds that I can find that you were in breach of contract."
In a subsequent case heard on the same day, involving the Abbey, Judge Cooke decided that the claimant had in fact done this.
As a result the judge decided the Abbey's penalties had been illegally high and awarded the claimant more than £1,000.
Once again, neither of the banks was represented in court by either a solicitor or barrister to argue their case.
But a Lloyds TSB spokeswoman said: "We are pleased with Judge Cooke's ruling as it appears to acknowledge our position in respect of current account service charges.
"The court has agreed with us that these are charges for a service and not default or penalty fees as has been argued by others," she added.
Fees or penalties?
This latest decision illustrates the fundamental uncertainty surrounding the law.
Tens of thousands of bank customers have so far successfully sued for the return of their charges.
They have claimed that the penalties they have had to pay, often running to thousands of pounds, are unfair and illegal under consumer protection legislation.
The banks say that their charges, now increasingly styled as "fees for a service" rather than penalties, are in fact both fair and legal. However, the banks always refuse to argue the points in court, and either settle claims before hand or allow judges to award claims against them by default. In Leeds Mercantile Court yesterday about 250 claims were settled, partly as a result of the judge threatening to seize on one or two claims for a test case.
250 cases were settled in Leeds Mercantile Court this weekA judge in Birmingham has rejected two more claims by bank customers for the return of "unfair" overdraft charges.
Judge Cooke ruled that the two, both customers of Lloyds TSB, had not broken their contracts with the bank when going overdrawn without permission.
As a result the charges could not be penalties and so could not be illegal.
In May, Judge Cooke employed a similar argument when he became the first judge in the country to rule in favour of a bank facing this sort of claim.
That was also in favour of Lloyds TSB.
This latest decision highlights the increasing uncertainty surrounding how different district and county court judges approach bank overdraft claims.
Next week a judge in Hull will attempt to strike out more than 40 claims, relying in part on some of the arguments laid out by Judge Cooke in his first decision last month.
Other judges have dismissed the banks' defences almost out of hand and find almost automatically in favour of claimants.
Common law
To claim that a penalty charge is unfair, claimants may have to show that their contract with their bank actually prohibits them going overdrawn on their accounts without permission.
If the contract does not state this, then any charge incurred while being in the red may simply be a fee for a service, rather than a penalty.
Judge Cooke came to his latest decisions after asking the claimants if they thought they had in fact been in breach of their contracts.
There are no grounds that I can find that you were in breach of contract Judge Cooke
When they answered that they did not think so, he said: "The charges are a penalty at common law. Customers need to be in breach of contract.
"There are no grounds that I can find that you were in breach of contract."
In a subsequent case heard on the same day, involving the Abbey, Judge Cooke decided that the claimant had in fact done this.
As a result the judge decided the Abbey's penalties had been illegally high and awarded the claimant more than £1,000.
Once again, neither of the banks was represented in court by either a solicitor or barrister to argue their case.
But a Lloyds TSB spokeswoman said: "We are pleased with Judge Cooke's ruling as it appears to acknowledge our position in respect of current account service charges.
"The court has agreed with us that these are charges for a service and not default or penalty fees as has been argued by others," she added.
Fees or penalties?
This latest decision illustrates the fundamental uncertainty surrounding the law.
Tens of thousands of bank customers have so far successfully sued for the return of their charges.
They have claimed that the penalties they have had to pay, often running to thousands of pounds, are unfair and illegal under consumer protection legislation.
The banks say that their charges, now increasingly styled as "fees for a service" rather than penalties, are in fact both fair and legal. However, the banks always refuse to argue the points in court, and either settle claims before hand or allow judges to award claims against them by default. In Leeds Mercantile Court yesterday about 250 claims were settled, partly as a result of the judge threatening to seize on one or two claims for a test case.
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