Diary of Proceedings at House of Lords 23rd - 25th June 2009

[Amethyst]

We will keep you updated as much as possible although we don't expect first news until just after 1pm today.

the queue for security is massive and doors open 10.15 for a 10.30 kick off. Its in the entrance just off that lawn infront of big ben where all the interviews with ministers (mostly ex ministers now lol) take place.

We have one member there today, probably two tmw and thursday and will get info on here as and when though we expect the preliminarys to be quite straightforward.

Also Tom Brennan will be on five live radio at lunchtime talking about the waiver and destruction of data.

Keep an eye on this thread for rambles and news




St Stephen's Entrance


A committee room at the HoL (just to set the mood) not today and probably not room 2a, and ur not allowed to take piccies

[Amethyst]

Okay update give me ten to type it up xx

Preliminarys - Jonathan Sumption QC. on behalf of the Banks is speaking for today and half of tomorrow,

The courtroom is completely packed, theres about 50 members of public there.

The main point the banks are making is that the charges cross subsidise other parts of banking and that doing that isnt against the law - and that mobile phone companies and travel companies do it all the time and no one has a problem with that.

Sumption stated that theres a table in the cruikshank report which relates to frances standing order charges and how they cross subsidise other parts of frances banking system


The Lady lord said about the cross subsidy bit - what if an OAP goes to the hairdressers on a half price tuesday - what about the others that pay full price is that fair etc

Another lord said the OAP would be worthy to be subsidised

Sumption said 'worthiness is not an issue'

One of the lords said banks are like robin hood in reverse

Sumption went through all the contract terms with the lords and basically their objection to the appeal is that there is confusion over the word PRICE in 6(b) of UTCCR regs

He says PRICE should mean the overall charges the banks make is the price/renumeration - ie ALL revenue rather than as the judges seem to think a price like advatantage gold account fee.


He pointed out that SMith in his original judgment said all charges were for a service except for the unpaid item fees and the appeal said all were charge for service INCLUDING unpaid item fees


He also complained that the OFT were attacking the banks of two fronts - competeition with the PCA report and the UTCCR. He complained it was a form of price control and as such illegal.





Also Charges are necessarily many times higher than the cost to the banks as they are a main income stream


2 or 3 times the law lords have stated the in UTCCR if a term is considered unfair it would be unenforceable
Sumption said the UTCCR applies to current and past contracts which raises the financial stakes, he said he doesnt think the lords grasp what the issue is unless they know the consequences and the OFT are saying the consequences are irrelevant. Sumption intends to make the law lords aware of the implications/consequences of the judgement.

[Amethyst]

Re: TODAY at the House of Lords - OFT v Banks latest news

Rightio

Suption is on again in morning for about 20 minutes, then Abbey will take over for the rest of morning then thats it for the banks case and it goes over to the OFTs turn.

All a bit boring but basically arguing over definition of price - Sumption (banks) argued that forgone interest was already part of the price - in the original hearing Nationwide argued the same thing I believe (will look it up in a minute)


EXc will write more up when he gets back as i was mid picking child up from cooking club.

[EXC]

Re: TODAY at the House of Lords - OFT v Banks latest news

Just to pick up on what Ame was saying, a Law Lord specifically asked Sumption ''Is foregon interest part of the price (of a current account)'' and Sumption answered ''no''.

When asked the same question by Justice Smith in the original hearing. Geoffrey Vos - QC for nationwide - said yes.

[EXC]

Re: TODAY at the House of Lords - OFT v Banks latest news

Amethyst got the main points of the day dealt with in her summaries.

Sumption for the banks was on all day. Like the first appeal the judges didn't interupt with questions as much as Smith did in the High Court.

The main legal points he was arguing were the interpretation of the EU Directive (including drafts!) by the UTCCR regulations and the definition of 'price' as stated in the regulations. He cherry picked quite a bit from the First National Bank and Easy Car judgments.

He also seemed to stray into giving non-legal arguments by accusing the OFT of ''attacking'' them on two fronts and trying to force price control on the banks. He made lots of references to the OFT PCA Market Study in which he criticised some of the OFT's findings.

The only real debate during his submission was on the cross subsidy where the banks eek their income from just 20% of their customer base. Although Sumtion was right to say this is not illegal
and cross subsidy exists in other markets the Law Lords did appear to express some doubt as to the morality of it. This is when one Law Lord suggested the banks are like ''Robin Hood in reverse.

Hopefully we should get to see the OFT reply tomorrow.

[EXC]

Re: TODAY at the House of Lords - OFT v Banks latest news

Got here early today - Having breakfast in the Jubilee bar with Budgie. Well muffin & coffee and very nice too. 90p a cup subsidised by you. Thanks.

We are just going to nip around the back of the House of Commons for a quick ciggy before joining the queue into Committee room 4A. That of course is assuming we can get past the queue at the "fees" office ( where all the MP's are waiting to pay back their overclaimed expenses ).

We will try and get a report out to Ame at lunchtime.

Exc + Budgie

[Amethyst]

Re: TODAY at the House of Lords - OFT v Banks latest news

This mornings occurring

Vos said if the charges were found to be unfair it would apply back to when regulations began in 1995 - limitations issue not touched upon tho as yet

Jonathon Crow doing really well - he spent most of the time answering Sumptions arguments from yesterday. A big part has been about how competition issues and consumer protection issues are interlinked and how the UTCCR are meant to promote competition.

One of the Judges said the charges are extortionate. Lord Phillips asked Vos why they don’t just call the charges Penalties.

Fair bit about price and how a typical consumer would be aware of charges and that they likely to incur one over the lifetime of their account and thus that made them a core term and part of the price.

Lord Phillips if these are penalties they should simply say they are penalties and should be able to justify the figures

Vos said the judgement had already deemed the terms not penal and that wasn’t being appeal

Crow is quoting big chunks from the Cruikshank report, PCA reports, NI competition commission report

Vos also admitted his previous (april 08) comments about foregon interest not being part of the price and said it was irrelevant anyway - so feck knows why they bought it up yesterday

[EXC]

Re: TODAY at the House of Lords - OFT v Banks latest news

Quick Update from the HoL

Sumption finished off his submissions this morning.
Main thrust was that relevant charges are part of the "price" and are core terms and therefore not subject to UTCCR.

"Apart from overdraft interest the insufficient funds fees are the only fees or price paid by the Consumer so must be the price"

His conclusion was that "If the terms describing the charges are assessable then the Banks are exposed. It would mean that the charges could be unenforcable from the date the directive came into force ( subect to limitation act ) and might mean that the contracts were unenforcable in toto". There would be severe financial consequences for the banks and the probable loss of the free if in credit banking model"

Lord Phillips asked "It has been said that some of these charges may be penal to the Consumer, some may say extortionate" Why havent the banks simply said that these are penalties and set at the levels that they are to cover thier costs"

Sumption replied along the lines that the arguments regarding penalties had already been decided by Justice Smith in the lower court. The resort for extortionate pricing should be via the competition route rather than contractual. The solution should be via market structural remedies.

Lord Phillips, the difficulty is that one cannot measure the service provided for the price.

Sumption It doesnt matter whether banks wish to apply charges the way that they do either as a way to provide free if in credit banking to those Customers who keep their account mostly in credit or as a means to pay the highest dividends to shareholders compared to other banks.

Lord Phillips - One might argue that the former is the more laudible approach.

Vos from Natiowide then presented some alternative arguments most of which were focussed on trying to identify a "typical consumer". His point was that a typical consumer is one who pays or expects to pay relevant charges and not someone who puts £1 million into an account and has no expectation of ever paying charges.

Vos also said that "Charges are significant and would be significant to the typical consumer as we have described him"

and "You have to bear in mind that these charges are "if" charges that may or may not come into play.

and even if consumers enter into contracts with no intention of ever incurring charges this has no bearing as to whether these are core terms, which they are.

Lord Phillips," if you dress up your penalty as the cost of exercising an option you can't then condone it as a penalty"

More to follow and we will elaborate on most of the above points later this evening.

Crowe has now started on his submission for the OFT and has started by drawing the Lords attention to the Cruickshank report, the Northern Ireland commission report and the OFT's PCA report and is attempting to demonstrate that the competition aspects and consumer protection aspects of the charges are closely linked and cannot be seperated as the banks have stated

Budgie and Exc

[EXC]

Re: TODAY at the House of Lords - OFT v Banks latest news

Just a few points from this afternoon in no particular order.

Asked by a Law Lord if the banks could combine other accounts ie savings accounts with current accounts to avoid going overdrawn, Crow said: ''The bank has a right to combine accounts but not an obligation.

Sumption said the banks believed that a reference to the ECJ by the HoLs would be a problem because of the delay and that the ECJ may favour a national regulator enforcing an EU directive.

In the OFT's reply to the banks view that any issues with the charges should be a matter for competition legislation rather than consumer regulations, Crow quoted plenty of evidence that one of the main purposes of the directive that gave rise to UTCCR was to promote competition.

A lot was spoken about the the effect of an unfair contract term in UTCCR which says that an unfair term is one that causes ''a significant inbalance of the rights and obligations of either party''. Sumption essentially argued that if the terms were deemed unfair and not binding the banks would be ''forced to provide costly services for no charge'' resulting in an inbalance.

Nationwide's Vos was asked if he thought the charges were ''extortionate''. He said ''Well I won't say they are not significant for the average consumer''. Vos also mentioned the significance of the Foxtons case.

Crow should be finished by lunchtime tomorrow though I don't know if the banks get to reply.

[Amethyst]

Re: TODAY at the House of Lords - OFT v Banks latest news

Last day today so exciting me thinks.... one step closer and all that. Much quieter today in the hearing so far (but still 20 mins to go). Ian Pollocks attending again so should have a comparative BBC report this afternoon too.

Couple bits about yesterday - Crow seems to be putting forward the OFT intention to assess the charges under the umbrella of the PCA report with regards frequency and transparency regardless of whether the UTCCR ends up being applied or not. We do know this anyway but i think we tend to forget about all the surrounding factors and are basing everything on this case. Stephen Hone has written to the OFT regarding the PIL elements of the judgments to see whats happening there so should be interesting to get that response.

EXC is at the hearing again, think he just likes hob nobbing with the Lords myself. He'll report in at lunch recess so again 1ish.

If somebody could keep an eye on twitter after 1ish ( http://twitter.com/LegalBeagles ) and copy stuff over here - I'll put a few notes there as i might be out - otherwise Budgie will write some bits up, and I / EXC will a little later.

Nice to see so many peeps keeping an eye on proceedings btw

[Budgie]

Re: TODAY at the House of Lords - OFT v Banks latest news

UPDATE - DAY THREE

Thanks to EXC for this report

Highlights from this morning

CROW - wanted to clarify situation re OFT continuing it's investigation irrespective of the outcome of the HoL appeal. Crow said that the OFT are entitled to assess for fairness but not that they necessarily will.

CROW - made reference to his written submission where the OFT have given examples as to what happens when a consumer goes 1p overdrawn with various banks. He also suggested that the Lords read an article in todays Times which explains what happened to a student who found himself in a similar position.

LORD PHILLIPS - Raised the penalty issue twice this morning. He said that he had been reading the original penalty judgment and said
"You can have a clause that basically has the same effect as a penalty" and he asked Crow
"Do we have the passage about disguised penalties ( from the original test case hearing) Crow said he would find it.

CROW - On a point of law said that according to the directive, just because a Consumer signs a contract doesnt necessarily mean he has agreed to all of its conditions.

CROW - Said " Don't assume that the free if in credit model would disappear, the banks could have other ways of dealing with the situation".

BARONESS HALE - Made reference to an editorial in the Independant which was outling the test case, She said that the article was incorrect and that the Editor did not understand what the case was about

LORD PHILLIPS - Was agreeing with something Crow had said when he stated "Charges are not in exchange for a service but are a concealed way of providing funds for the services" to which Crow responded "Charges are because of and not for a service"

CROW - Was having a pop at Vos regarding his figures during yesterdays submission and stated that they were incorrect.

CROW - Made ref to Vos's statement that incurring charges is normal in the course of the contract for a typical consumer. Crow pointed out that the Nationwide terms state that a shareholder could be expelled for having an unauthorised overdraft.

LORD PHILLIPS - asked Crow "What are the consequences if the terms are invalid" Crow stated "They would not be binding upon the Consumer but any refunds would be a matter for the UK Courts"



Its now lunchtime

Crow will speak for another 40 mins after lunch and we then believe the banks have the opportunity to respond

Budgie ( on behalf of EXC )

[Amethyst]

Re: TODAY at the House of Lords - OFT v Banks latest news

Thursday Afternoon ( thats it now)

crow did his summing up and explained the OFTs biggest objection to the charges was the interplay between the level of the charge and the abesence of consent.

the PCa report shows most consumers are genuinely unaware how much defaulting will cost etc. he referred to both PCA and Cruikshank reports to make his points.

Crow stated the OFT concerns over the charges will remain even if the Lords find against them.


Sumption argued that conpetition legislation would be more appropriate than consumer regulations.


VOS al;so spoke and replied that in the nationwide contract which stated shareholders who ran up unauthorised overdrafts would be ejected, yes it was there but in practise it doesnt happen.


Lord Phillips acknowledged the Vast number of stayed cases and the lords seem to realise the urgency of getting decision out asap.



What happens Next ?

The ecj is a definate possibility and was discussed briefly by Crow and Phillips - OFT were saying they would, if it goes to ECJ, take submission 2 in and not submission 1, not a lot of use as we dont know what either submission was.

Crow stated there were basically 4 stages (sorry think i only got three)

OFT complete their investigation which was in progress
If oft find them unfair they will seek voluntary compliance form the banks
If the banks won't comply voluntarily they will apply for an injunction

further litigation wasnt mentioned

EXC will add more later on and clarify anything I have missed.

[EXC]

Re: TODAY at the House of Lords - OFT v Banks latest news

I think Ame & Bud covered it all but I'll double check in a bit.

There was a discussion at the end about the possibilities of the case being referred to the European Courts of Justice. Phillips and Crow went through the various elements of the OFT's case and concluded that the ECJ would have the jurisdiction to to rule on at least half of them. Basically because much of the case turns on the interpretation of the European Directive that gave rise to UTCCR.

Earlier Sumption had said that there was no fast-track method to having a case heard at the ECJ but Crow convinced the court that there was.

It's impossible to guess the likelyhood of the Law Lords referring it to Europe but he prospect is very real.

Over the 3 days I'd have to say the OFT are on top. Although Sumption's submission was good the OFT's reply did look like it successfully countered all the major arguments and this seemed to reflect the limited nature of Sumption's final reply this afternoon which only dealt with minor points such as the definition of 'typical consumer'.


On a more light-hearted note there was a wonderful exchange between Crow and Lady Hale - who spent the entire hearing with a broad smile on her face for no apparent reason.

Anyway, Crow was having a tough time convincing her Ladyship that you can make a payment instruction without knowing you will incurr a fee. Lady Hale said ''But you know if you write a cheque. You know if you use your debit card''. Crow went on to the subject of the typical consumer not reading the small print in a contract. Her Ladyship piped up ''My Mother - a woman of considerable intelligence - always reads the small print before signing any contract. So there are people who do you know''.

Crow, who you could just feel was thinking 'and your point?' politely but dryly replied ''I am lost in admiration, my Lady''.

[Amethyst]

Re: Diary of Proceedings at House of Lords 23rd - 25th June 2009

Just copied the diary posts from the main thread ( TODAY at the House of Lords - OFT v Banks latest news - Legal Beagles ) for ease of reference.

Once the transcripts are available (fingers crossed) it shall be much easier to rip apart lol.