Fail unfair test under schedule 2 - but be upheld under Regulation 5(1) - HELP !

[Amethyst]

Can someone clever explain this for me please Thank you xx


iii) Group 5: Financial penalties – paragraph 1(e) of Schedule 2 11. 5.1 states that “It is unfair to impose disproportionate sanctions for breach of contract”. This is not correct. Schedule 2 to the 1999 Regulations sets out an “indicative and non-exhaustive list of terms which may be regarded as unfair” (our italics). It is very important that the law is described accurately, especially given the current attention to financial services’ charges and fees. While the Association does not support disproportionate sanctions, it is possible that a contractual term might ‘fail’ the Schedule 2 test, but be upheld as fair under Regulation 5(1).





This is from Building Societies Association in a consultation on guidance from the OFT on Unfair Terms. ( Consultation on revised guidance under the Unfair Terms in Consumer Contracts Regulations 1999 (OFT311cons: April 2007) - OFT Consultation )


1(e) is
(e) requiring any consumer who fails to fulfil his obligation to pay a disproportionately high sum
in compensation;


5(1)Unfair Terms
5. - (1) A contractual term which has not been individually negotiated shall be regarded as
unfair if, contrary to the requirement of good faith, it causes a significant imbalance in the parties'
rights and obligations arising under the contract, to the detriment of the consumer.

[righty]

Re: Fail unfair test under schedule 2 - but be upheld under Regulation 5(1) - HELP !

IMHO they are wrong & are simply muddying the waters insofar as each finding will be based on the merits of that particular case - Despite the ongoing OFT v Banks case there remains in English Law the precedent that you can't claim for more than you lose mainly - because if you could it would be positively beneficial for you to ensure the other party breached the contract thereby enabling you to gain more than you would have otherwise been entitled to

[Amethyst]

Re: Fail unfair test under schedule 2 - but be upheld under Regulation 5(1) - HELP !

hmmmmmm think what I thought might be bad back then might actually be good now?

[natweststaffmember]

Re: Fail unfair test under schedule 2 - but be upheld under Regulation 5(1) - HELP !

Is that saying that the cost might be too high but that the reason for the charge is not necessarily creating an imbalance if you take into effect the whole contract. What I mean is that one hit on one day might not necessarily be imbalance but 3 could be and contrary to good faith.
I hope that makes sense?

[Curlyben]

Re: Fail unfair test under schedule 2 - but be upheld under Regulation 5(1) - HELP !

The ONLY way I could possibly see this working is an individually negotiated contracted where BOTH party's agreed to all terms.

[righty]

Re: Fail unfair test under schedule 2 - but be upheld under Regulation 5(1) - HELP !

hmmm quite. When this government gave the banks the poor without safeguards & on the pretext it would help them manage their affairs if their benefits where paid directly into banks account the banks, rather than the widely publicized reluctance must have been popping the Champaign for days.

Here was a captive customer with an albeit small but guaranteed income who they must have known would inevitably default thereby incurring their exorbitant penalty charge. Make no mistake when the banks realized the opportunities being offered they couldn't have been more happy than to have them as customers

When this government requested the banks set up basic accounts they should have sort guarantees from the banks no penalty charges particularly on accounts where no OD was possible

[Centium5000]

Re: Fail unfair test under schedule 2 - but be upheld under Regulation 5(1) - HELP !

Thing is, the SC ruled definitively the relevant terms aren't for breach so the 'fails to fulfil his obligation' bit doesn't apply.

...well until the court sees all Budgie's letters that present them as default charges!

I think what the Building Societies Association is getting at is that the Schedule 2 terms are only indicative i.e. they aren't necessarily unfair, but would raise suspicion and need to be looked at closely by a court.

So, in theory, a term could be in Schedule 2 (e.g. disproportionate penalty) but not be 'unfair' under 5(1).

It would still have to be shown to be
(a) contrary to good faith, and
(b) create an imbalance in rights and obligations, and
(c) be of detriment to the consumer

So if any one of those tests failed it wouldn't be unfair despite being on the Schedule 2 grey list.

It's difficult to imagine a situation where that could happen, and if I could I wouldn't suggest it here in case a Banker's solicitor happened across this post

I think the BSA is just trying to be clever!

[righty]

Re: Fail unfair test under schedule 2 - but be upheld under Regulation 5(1) - HELP !

The problem for those on benefits or low income that once in the penalty charges trap there's no way out, the problem just escalates rapidly to the point it's huge. I know of a few victims who's OD's comprising only of charges have mushroomed in matter of weeks from the initial £35 to over £700

[natweststaffmember]

Re: Fail unfair test under schedule 2 - but be upheld under Regulation 5(1) - HELP !

Guys, we have to remember that what Amethyst has quoted from was from 2007 prior to the SC decision so NOW in context it can be difficult to do but then it was a lot easier to see where it was going.