OFT let consumers down AGAIN on Overdraft Charges

[natweststaffmember]

Re: OFT let consumers down AGAIN on Overdraft Charges

On the penalty issue, Aequitas on CAG has made a thread which predates the OFT test case which in hindsight(Oh how I wish I could have it back) explains the penalty issue quite succinctly.
Are bank charges penalties? - The Consumer Forums

[Judge mental]

Re: OFT let consumers down AGAIN on Overdraft Charges

Exc, I will try to clarify the thoughts behind my comments, as always you proficiently raise valid and interesting points.

''Whilst they might have listened to consumer views (who they are supposed to represent and protect after all) they have not actually taken them onboard.''

It is not really the function of the OFT to 'represent' consumers or anybody. It is principally a competition authority (and as such has to act impartially), it's aim being to make markets work from a consumer perspective, unlike a designated consumer group or industry watchdog - a subtle but important distinction in understanding the constraints they have to work under.

If I remember correctly, it was the OFT who specifically invited representation from consumer groups, if representation was not part of their remit surely there would not be so many consultations and did they not in effect represent the consumer in the test case?

I do not understand how they can be impartial, is it possible to take impartial enforcement actions? The courts and the Ombudsman have to be impartial in because they arbitrate between two or more parties in dispute, that is not my understanding of the role of the OFT, which is protection of consumers from market malpractice and promote fair competition.
I have been unable to find anything on the OFT website that suggests they are or required to be impartial, however many of the words they use do show a bias towards the consumer, examples taken from OFT website –

The OFT has wide ranging duties and functions in relation to Consumer Protection.

As an independent professional organisation, the OFT plays a leading role in promoting and protecting consumer interests throughout the UK, while ensuring that businesses are fair and competitive

The OFT takes a risk based, intelligence led approach to enforcement using all its available tools in innovative and holistic ways to address market malpractice.

''The OFT are only limited in what they can do under regulation 6(2) . . . that is not the limit of their given power.''

What IS the limit of their given power?

Listed below are what the OFT state are its primary tools and legislation providing its legal powers -

The enforcement of competition law under the Competition Act 1998.

The enforcement of consumer protection legislation in matters that affect consumers in general.

Monitoring consumer credit through a licensing system under the Consumer Credit Act 1974.
Competition Act 1998
Consumer Credit Act
Consumer protection fron unfair Trading Regulations
Courts and Legal services Act
Distance Selling Regulations
EC Articles
Enterprise Act
Estate Agents Act
Fair Trading Act
Financial Services and Markets Act
Money Laundering Regulations
Transport Acts 2000 and 2001
Unfair Terms in Consumer Contracts

I will try to address the ther point raised (Banks manipulating/controling procedures) as soon as I can find some spare time.

[Kafka]

Re: OFT let consumers down AGAIN on Overdraft Charges

When the whole thing was cooked up secretly,
Are test cases usually cooked up publicly?
No they are not, but this was unusual in being presented as being in consumers' interests when those interests were not properly considered in my view. When the OFT undertook a fact-finding enquiry into current account default charges in April 2007 (just before the Test Case was announced), they were shown to have only consulted bankers and ignored consumers views. The thread on this is interesting for several reasons
OFT review: We ONLY talked to bankers
I have already commented on this thread that even after the SC judgment they still stated that they were not going to speak to consumer groups, but changed this position under political pressure. I naturally question the commitment to balance when they have consistently acted on the views of the banks that have caused the problems, with little attention paid to the views of the consumers.

the BBC reported that it was actually the banks that offered to go to the Test Case, rather than the OFT showing initiative.
Am I disputing this?
I never said you were - I merely stated what the BBC had reported. I don't recall that the OFT ever made this clear in their statements.

An immediate concern of all consumer groups was that there was no clear timeframe
Are there ANY clear time frames in litigation?
Generally not, but the regulators spoke of how they would ensure that the process was conducted expediently, whilst never providing any clarity on the structure of the anticipated timings. It was left to consumer groups to point out that it would be many years before any result was obtained.

and that the TC would be allowed to drag on and on indefinitely, because that suited the banks as they were no longer having to settle claims, while being left to carry on charging indiscriminately
But it didn't drag on indefinitely did it?
No because the case collapsed after the first of two stages and 2.5 years. We will never know how long the second stage might have lasted, but we can hazard a guess that the banks would have dragged it out further and appealed everything to delay progress because they were quids in while the waiver was in place and they were still overcharging.

The FSA produced safeguards for consumers that were routinely ignored and don't forget that the T&Cs examined were largely those that were doctored by the banks in defiance of the FSA's reassurance that this would not be allowed while the Test Case continued.
Again I'm not disputing this

The courts were involved with the strategy here, but no guidance was given to them,
Yes it was. Twice.
As I recall, the Martin Lewis had a response from the master of the Rolls that showed that he had delegated it all to his Deputy. He told the courts to do what they thought best, but that there would probably be a general stay in proceedings. The result was some courts not appearing to know what cases were linked to the Test Case and different actions being taken. In my own case, I was stung £100 for an allocation fee after the waiver was announced, even though the court clearly had no intention of allocating the claim. I also had a credit card claim stayed as late as last October by a Senior Circuit Judge, citing the Test Case. The control of the county courts was a shambles in terms of fairness or consistency, much as it is now with the stayed claims.
Perhaps we should agree to differ on the interpretation of the word 'guidance'.

resulting in the Test Case being used as an excuse to stay all manner of totally unrelated claims. Had consumer interests been fairly considered in the planning this should never have been allowed to happen.
Allowed by who? The OFT have no jurisdiction on the courts staying unrelated cases.
No they don't, but you can wonder whether the interests of consumers might have been better served had they been considered along with the interests of the banks when the Test Case was agreed, remembering that the Test Case was stated to be in consumers' best interests.

Finally, soon into the Test Case, we had the staggering public admission by Cavendish Elthorne - a senior OFT figure - that the OFT would rather make an agreement with the banks than see the Test Case through to a proper conclusion.
This was prior to the test case, not soon into it.
I think this is splitting hairs. The Test Case was announced in late July 2007 and the announcement by Cavendish Elithorne was broadcast by the BBC on 11 September.
BBC NEWS | Business | OFT may compromise on bank case
I find it odd that the OFT agreed to this monumental test case (in consumers' interests) and committed vast resources to sort out the problems comprehensively, yet less than 2 months into the preparation, one of their key figures goes on record to state that they would prefer not to go through with it.
The ideal solution to them was evidently some half-cock agreement that reduced the charges but still allowed the banks to make a great profit from default charges. This was eerily reminiscent of the mess over credit card charges that has still never been sorted out after 4 years.

I actually thought this would be the eventual outcome, when the banks realised they could not win in court after dragging it out, and would have given them licence to take a reduced level of profits from penalties, in the same way that the 2006 credit card report failed to bring about the changes to actual costs.
I don't understand what you're saying. Credit card charges were changed to £12 as a direct result of the OFT's intervention.
But the 2006 report expressly stated that £12 was not a recommended rate but a threshold for action, and charges should be realigned to actual costs. Banks only lowered their charges to this to avoid enforcement action and not one of them ever reduced charges to actual costs as instructed. Although the £12 became pretty standard for credit cards and catalogues, Egg ignored it as did most - if not all - mortgage providers, even though the principles were supposed to read across to all regulated agreements.
Yes, the £20 and £25 charges were dropped to £12, but the OFT was humiliated again by the banks and after 4 years they are still applying these charges and people are still flooding the courts with claims to recover them. Despite all of this, the OFT is still hooked on the idea of voluntary compliance by the banks and the penny just never drops.

I think there has been a misunderstanding that my post was a criticism in some way when this was not the case. I just wanted to point out that I always doubted the OFT's commitment to see the Test Case through or to achieve a just settlement to the bank charges issues, and I always believed that the banks were pulling the strings successfully and would come out of it winning somehow, even if they had not succeeded in misleading the Supreme Court.

[EXC]

Re: OFT let consumers down AGAIN on Overdraft Charges

Exc, I will try to clarify the thoughts behind my comments, as always you proficiently raise valid and interesting points.



If I remember correctly, it was the OFT who specifically invited representation from consumer groups, if representation was not part of their remit surely there would not be so many consultations and did they not in effect represent the consumer in the test case?

The OFT did indeed specifically invite representations from consumer groups. In parallel they also specifically invited representations from the banks. There is a difference between accepting representations and representing on behalf of as such.


I do not understand how they can be impartial, is it possible to take impartial enforcement actions? The courts and the Ombudsman have to be impartial in because they arbitrate between two or more parties in dispute, that is not my understanding of the role of the OFT, which is protection of consumers from market malpractice and promote fair competition.
I have been unable to find anything on the OFT website that suggests they are or required to be impartial, however many of the words they use do show a bias towards the consumer, examples taken from OFT website –

The OFT has wide ranging duties and functions in relation to Consumer Protection.

As an independent professional organisation, the OFT plays a leading role in promoting and protecting consumer interests throughout the UK, while ensuring that businesses are fair and competitive

The OFT takes a risk based, intelligence led approach to enforcement using all its available tools in innovative and holistic ways to address market malpractice.

I know what you mean. They do retain the interests of consumers as a principle but I think that it falls short of describing them as being representative of them, certainly in the same way that - for example - Which? would be. In any study Which? will only take the views of consumers into account where as the OFT is obliged to account for the views of industry and all stakeholders

Any organisation that has powers of enforcement must be seen to act impartially. It would be anarchy otherwise.


Listed below are what the OFT state are its primary tools and legislation providing its legal powers -

The enforcement of competition law under the Competition Act 1998.

The enforcement of consumer protection legislation in matters that affect consumers in general.

Monitoring consumer credit through a licensing system under the Consumer Credit Act 1974.
Competition Act 1998
Consumer Credit Act
Consumer protection fron unfair Trading Regulations
Courts and Legal services Act
Distance Selling Regulations
EC Articles
Enterprise Act
Estate Agents Act
Fair Trading Act
Financial Services and Markets Act
Money Laundering Regulations
Transport Acts 2000 and 2001
Unfair Terms in Consumer Contracts

I will try to address the ther point raised (Banks manipulating/controling procedures) as soon as I can find some spare time.

In the context of bank charges only 3 areas of legislation could potentially apply. It is widely accepted that with CCA and UTCCR and now that the exemption 6.2 stands in UTCCR, a collective general challenge couldn't be made as both would have to rely on individual circumstances.

I don't know much about the OFTs powers under the Competition Act but I did ask the OFT on several occasions what they were in relation to bank charges and the answer was that they could not enforce it themselves - only refer it to the Competition Commission, which I think they should have done.

[natweststaffmember]

Re: OFT let consumers down AGAIN on Overdraft Charges

Kafka, on EGG they were given a threshold of £16.00 not £12 because they only accept limited methods of payments.
Furthermore, there was a timescale for compliance which was within 3 months of the report. ALL providers of credit cards complied albeit I do take your point since the report said that the figure that they came too should not be simply a figure that credit card providers should lower it too. Of course, they all ignored that part of the report but still lowered charges.

[natweststaffmember]

Re: OFT let consumers down AGAIN on Overdraft Charges

http://www.moneyweek.com/blog/bankin...ges-00140.aspx

Quite a nice summary of how badly the view of the OFT is now becoming.

[Amethyst]

Re: OFT let consumers down AGAIN on Overdraft Charges

Sorry Kafka,

''even after the SC judgment they still stated that they were not going to speak to consumer groups, but changed this position under political pressure.''

I dont agree, the Judgment was on 25th November.

19th November - email from OFT

''It was certainly envisaged that the consumer groups represented would be the groups which played a part in the transparency working group. ''

7th December - email from OFT

''As set out in our press notice of 25 November 2009, the OFT is now considering the detail of this judgment before it makes a decision on whether or not to continue an investigation into unarranged overdraft charging terms. It will also explore with others the implications for consumers and for existing and future legislation and regulation. The OFT expects to make a further announcement in December.
The OFT would be interested in learning about and understanding your views and those of other interested consumer groups and individuals regarding this question, so that we can take them into account in arriving at our decision. To that end, we would welcome the opportunity to meet with you and give you an opportunity formally to convey your views to us. I am therefore writing to invite you to a roundtable meeting with other groups and individuals who have expressed an interest in our work in this area. A list of invited groups/individuals is attached to this email. We would like to hold this meeting at 3:30pm on Wednesday 9 December at the OFT. ''


Maybe you could FOI them for a list of meetings with various parties, between Jan 2007 and now.

[EXC]

Re: OFT let consumers down AGAIN on Overdraft Charges

''But the 2006 report expressly stated that £12 was not a recommended rate but a threshold for action, and charges should be realigned to actual costs.''

The OFT never said the charges should be realigned with costs, expressly or otherwise.

''Banks only lowered their charges to this to avoid enforcement action and not one of them ever reduced charges to actual costs as instructed. Although the £12 became pretty standard for credit cards and catalogues, Egg ignored it as did most - if not all - mortgage providers, even though the principles were supposed to read across to all regulated agreements.''

The OFT never instructed credit card providers to reduce charges to actual costs. And neither was there a supposition of a read over to all regulated agreements.

[natweststaffmember]

Re: OFT let consumers down AGAIN on Overdraft Charges

''But the 2006 report expressly stated that £12 was not a recommended rate but a threshold for action, and charges should be realigned to actual costs.''

The OFT never said the charges should be realigned with costs, expressly or otherwise.

''Banks only lowered their charges to this to avoid enforcement action and not one of them ever reduced charges to actual costs as instructed. Although the £12 became pretty standard for credit cards and catalogues, Egg ignored it as did most - if not all - mortgage providers, even though the principles were supposed to read across to all regulated agreements.''

The OFT never instructed credit card providers to reduce charges to actual costs. And neither was there a supposition of a read over to all regulated agreements.

On the last part, re the supposition on all regulated agreements. The last paragraph of the report might be considered as such:

"Implications for other standard default charges to consumers
5.14 The broad principles set out in this statement are likely to be relevant to other default charges in standard agreements with consumers, such as those for mortgages, store cards and bank accounts. We expect the banks and other finance businesses to consider the wider implications of these principles, and to bring any similar charges they impose for breach of contract into line with them, where and as appropriate bearing in mind the different legal and practical contexts in which they operate. If appropriate steps are not taken within a reasonable timescale, further regulatory investigation of the position can be expected."
------------------------------- merged -------------------------------

Kafka, on EGG they were given a threshold of £16.00 not £12 because they only accept limited methods of payments.
Furthermore, there was a timescale for compliance which was within 3 months of the report. ALL providers of credit cards complied albeit I do take your point since the report said that the figure that they came too should not be simply a figure that credit card providers should lower it too. Of course, they all ignored that part of the report but still lowered charges.

Apologies but here is what the press release with regards to EGG


"4. The OFT is not proposing that default fees should be equivalent to the threshold, and a court will certainly not consider that a default fee is fair just because it is below the threshold. Where there are exceptional business factors, so that the presumption that a default charge over £12 is unfair is not applicable, this does not necessarily mean that the current level of the default charge is consistent with the OFT's interpretation of the requirements of unfair contract terms legislation. But for example, where a card issuer has a policy of requiring customers to pay minimum monthly repayments by direct debits, such as that operated by Egg, and offers credit cards only to customers that satisfy a relatively high scoring requirement it may be able to set a fair default fee at a level above the threshold."

[EXC]

Re: OFT let consumers down AGAIN on Overdraft Charges

Thanks Nattie - I stand corrected.

The problem is that it's rather meaningless as the OFT don't regulate mortgages so it's not something they could either investigate or enforce.

From: EXC
Sent: 31 July 2008 16:24
To: Kate Farrow
Subject: Re: PCA

Thanks and I'm sorry if it came across a bit harsh - frustration abounds I'm afraid!

I'm not sure if your department looks at mortgages but have you heard of the ''all monies'' clause in mortgage contracts?

Cheers

Nick




----- Original Message ----- From: Kate Farrow
To: EXC
Sent: Thursday, July 31, 2008 7:52 PM
Subject: RE: PCA

Hi Nick

Regulation of mortgages falls to the FSA.

Kate

[Kafka]

Re: OFT let consumers down AGAIN on Overdraft Charges

Sorry Kafka,

''even after the SC judgment they still stated that they were not going to speak to consumer groups, but changed this position under political pressure.''

I dont agree, the Judgment was on 25th November.

19th November - email from OFT

''It was certainly envisaged that the consumer groups represented would be the groups which played a part in the transparency working group. ''

7th December - email from OFT

''As set out in our press notice of 25 November 2009, the OFT is now considering the detail of this judgment before it makes a decision on whether or not to continue an investigation into unarranged overdraft charging terms. It will also explore with others the implications for consumers and for existing and future legislation and regulation. The OFT expects to make a further announcement in December.
The OFT would be interested in learning about and understanding your views and those of other interested consumer groups and individuals regarding this question, so that we can take them into account in arriving at our decision. To that end, we would welcome the opportunity to meet with you and give you an opportunity formally to convey your views to us. I am therefore writing to invite you to a roundtable meeting with other groups and individuals who have expressed an interest in our work in this area. A list of invited groups/individuals is attached to this email. We would like to hold this meeting at 3:30pm on Wednesday 9 December at the OFT. ''


Maybe you could FOI them for a list of meetings with various parties, between Jan 2007 and now.

Sorry - I think that this point is acquiring a gravity that I did not intend.
As I pointed out earlier in the thread, Stephen Hone asked them immediately after the SC judgment if they would be prepared to meet him to discuss the issues. They said they would not do this and he was so concerned that he posted a note about it at PC, but not on open forum.

I am not disputing the other points you make at all and I'm aware of the request to the meeting on 9 December because the staff were asked if we could attend as Stephen had a court hearing that day that he could not avoid. None of us could make it with so little notice, but they did arrange to meet Stephen some days later instead.

[Amethyst]

Re: OFT let consumers down AGAIN on Overdraft Charges

Its okay, I think it is important though because people are very quick to jump at the OFT for not consulting consumers, when in fact they did, the whole way through. Things may not have progressed as consumers would have liked but we were kept informed as much as possible and consulted and our views considered.

Regarding the period immediately surrounding the judgment, 6 days before the Judgment the OFT were happy to talk to consumers, and 5 days afterwards and met with them on the 9th December. I don't think that justifys your statement that ''but this changed when the Government stepped in to reveal the announcement would be made on 22nd December. Suddenly the consumer groups were welcome participants and politicians made much of the boast that there had been consultation with consumer groups'' at all. Especially as the 22nd date wasn't ''leaked'' until the 16th Dec anyway.

[PocketTheDifference]

Re: OFT let consumers down AGAIN on Overdraft Charges

Oh Well at least they won somthing using our money...

Royal Bank of Scotland has been fined £28.6m by the Office of Fair Trading (OFT) after breaking competition law. The fine was reduced from £33.6m to reflect RBS's admission and agreement to co-operate over the breaches, the OFT said in a statement.
The OFT began its probe after a tip-off from Barclays Bank that RBS had passed it confidential information about the pricing of loans.
RBS broke the rules between October 2007 and February or March 2008.
The OFT found that individuals in RBS's Professional Practices Coverage Team gave counterparts at Barclays details of the pricing of loans to large professional services firms, such as solicitors, accountancy, and property companies.
Barclays used the information to set its own prices, but escaped a fine because it reported the matter to the OFT.
Under OFT rules, Barclays' tip-off to the OFT means it will get immunity from prosecution. The OFT said that provided Barclays continues to co-operate it "is not expected to pay a fine in this case".

[Kafka]

Re: OFT let consumers down AGAIN on Overdraft Charges

The interesting phrase here is 'tip-off' from another bank.

Whatever happened to 'honour among thieves' then?

[PocketTheDifference]

Re: OFT let consumers down AGAIN on Overdraft Charges

Happy Enough to help other banks...but not their actual customers Typical

I like the fact that Barclays are allowed to get away with it becuase of the "tip-off" but can still use the data ha!