'Rewriting' claim on bank charges

[Legal Beagles]

Banks are "cosmetically rewriting" their terms and conditions to disguise the penal nature of their overdraft charges, a court hears.

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[Amethyst]

Re: 'Rewriting' claim on bank charges

'Rewriting' claim on bank charges


By Ian Pollock
Personal finance reporter, BBC News, House of Lords


The Law Lords are led by Lord Phillips, the senior Lord of Appeal

Banks are "cosmetically rewriting" their terms and conditions to disguise the penal nature of their overdraft charges, a court has heard. Jonathan Crow QC, for the Office of Fair Trading (OFT), made the claim during an appeal at the House of Lords.
He also said banks might not have to repay all their overdraft fees if they lost their appeal.
High Street banks are arguing against the OFT having the power to scrutinise the fairness of overdraft charges.
Contract views
Mr Crow spent the morning attacking the banks' view that their charges were so central to the operation of current accounts that they fell outside the scope of the 1999 consumer contract regulations, which covers parts of contracts that have not been individually negotiated.

THE STORY SO FAR...
Nearly a million people have claimed for the return of their unauthorised overdraft charges but their cases are on hold
If the banks win this week's appeal, these people are unlikely to get any money back
If the banks lose, then the legal arguments should move on to a key stage - a case to determine whether these charges were fair or not
Only then will people have a clearer picture as to whether billions of pounds will be handed back to customers



Crunch time for bank charges case
House of Lords appeal - Day 1
House of Lords appeal - Day 2

He said that when people opened a current account "overdraft charges are not what is being sold as part of the bargain".
He said the crucial distinction that meant the 1999 regulations did apply to bank charges was that current accounts did not involve any free negotiation between customers and banks.
There was "no meaningful consent", he said.
He went on to argue that bank charges could only escape the regulations if they were central to the bargain between bank and customer; were readily recognisable as the price of the service to the customer; and arose in the normal operation of the contract.
He pointed out that the Nationwide Building Society's terms and conditions stated explicitly that a customer could be expelled from membership for running up an unauthorised overdraft. How could this be a central feature of having a current account, he asked.
Mr Crow said that, in the recent past, banks had been rewriting their terms and conditions to remove suggestions that consumers were not allowed to go overdrawn and would be penalised for doing so.
Warning
Mr Crow went on to warn the five Law Lords hearing the appeal not to be scared of some dire warnings issued earlier by the banks' QC Jonathan Sumption.
He said it should not be assumed that the banks' current policy of providing free current accounts to people in credit was doomed if the appeal failed.
The structure of current accounts might just need to be adjusted, he said.
He denied that victory for the OFT implied there would be a deluge of litigation in other industries where cross-subsidies were common in pricing tariffs.
He also said it was "assuming a great deal" to suggest that banks might have to automatically make huge refunds to their customers if they lost the current appeal.
"Banks will not necessarily have to reimburse everything", he said.
"The domestic courts will have to sort out the consequences," he added.