OFT v Banks Judgment 25th November 2009 - 9.45am- Supreme Court - Test case

[davidl]

Re: OFT v Banks Judgment 25th November 2009 - 9.45am- Supreme Court - Test case

Natwest thanks for the offer but i asked the question as i have a visa electron card with abbey and the account is called a "youth account" what was taken out when i was sixteen.
So i asked as if kids cant get charged (and i still have the same account now) then the charging terms would not have been explained to me or even be in the terms and conditions of the account when i took it out. (just a thought)

[PocketTheDifference]

Re: OFT v Banks Judgment 25th November 2009 - 9.45am- Supreme Court - Test case

This was to do with the decision, whats the link to where they are discussing it then, im in the wrong place...?;p

[natweststaffmember]

Re: OFT v Banks Judgment 25th November 2009 - 9.45am- Supreme Court - Test case

Natwest thanks for the offer but i asked the question as i have a visa electron card with abbey and the account is called a "youth account" what was taken out when i was sixteen.
So i asked as if kids cant get charged (and i still have the same account now) then the charging terms would not have been explained to me or even be in the terms and conditions of the account when i took it out. (just a thought)

Kids accounts are irrelevant to adult accounts and the arguments I would use would not involve UTCCR 1999 so we are barking up the wrong alleyway on this one.
------------------------------- merged -------------------------------

This was to do with the decision, whats the link to where they are discussing it then, im in the wrong place...?;p

You're too quick to jump in .
I hope the explanation makes sense though.

[PocketTheDifference]

Re: OFT v Banks Judgment 25th November 2009 - 9.45am- Supreme Court - Test case

Is there a better thread than this one with all the talking happening?

[Sapphire]

Re: OFT v Banks Judgment 25th November 2009 - 9.45am- Supreme Court - Test case

Is there a better thread than this one with all the talking happening?

Not at the moment, everyone will just have to wait, its all being worked on and remember patience is a virtue.

[EXC]

Re: OFT v Banks Judgment 25th November 2009 - 9.45am- Supreme Court - Test case

This is an analysis of the Judgment by Mike Dailly which provides a good explanation of a crucial element that ran througout the test case - the 'excluded term'' and ''excluded assessment'' approach to interpreting 6.2 of the regulations.

As all the courts went with the 'excluded assessment' approach, it is this that gives sec 5 it's potential.


A narrow victory for the banks … but the door remains open for challenge

The OFT's case fell on Reg 6(2) of the UTCCR because the Supreme Court held that bank charges were truly a core term of customers’ banking contracts; an essential part of the ‘price’ for banking services. Yet, the Supreme Court carefully acknowledged that their decision did not ‘end the matter’ (para 61, Lord Phillips' speech).

Lord Phillips identified a critical point of far-reaching significance. If regulation 6(2) engages then you cannot assess the fairness of that contractual term (bank charges) in relation to the adequacy of cost; this is the 'excluded assessment' construction adopted by Mr Justice Smith (at para 422) and this construction was not challenged before the Court of Appeal or the Supreme Court.

Contrast this against the alternative construction which says that if regulation 6(2) engages to a contractual term (e.g. for bank charges) then there can be no assessment of fairness in any circumstance under the UTCCR; this is known as the 'excluded term' construction.

This distinction in statutory construction is of fundamental and far-reaching importance. The Supreme Court explicitly stated that given the court’s and parties’ acceptance of the 'excluded assessment' construction, it followed that the regulation 5(1) test of fairness was a standalone test. Regulation 5(1) was not concerned with adequacy of price, instead it was concerned with 'a significant imbalance in the parties rights and obligations under the contract to the detriment of the consumer'.
Thus, the Supreme Court identified (and almost positively encouraged) a fresh challenge to the fairness of bank charges under the UTCCR by establishing a standalone regulation 5 case. This door is open not only to individual consumers, and the OFT, but arguable the FSA.[1]

What might a regulation 5 case look like?

There is ample evidence in the public domain that banks have acted in bad faith over their explanations to customers about the reason and purpose of bank charges.

When the UK banks gave evidence to the House of Commons Treasury Committee on how bank charges were calculated they said: "[bank charges] are going to pay for all the people we have who pursue debt, collect debt, speak to customers and chase payments. The way these charges are arrived at is by taking these total costs and making some assumptions about the volume that is going to come through to arrive at the individual charges" (House of Commons, 2nd report, 25 January 2005, paragraph 50: http://www.parliament.the-stationery-office.co.uk/pa/cm200405/cmselect/cmtreasy/274/27405.htm).

This explanation is entirely different to what the banks told the court in the OFT's test case. As Lord Walker summarises in his judgement in the Supreme Court’s decision, the 12 million UK customers who pay bank charges generate 30% of the banks' total revenue stream from current account customers and cross-subsidise 'free if in credit banking' to 42 million other UK customers who never (or very rarely) incur charges. To put it simply, one customer in the UK will pay for four other customers' retail banking service; and in Govan Law Centre experience, the customer who has to pay these charges can ill-afford them.

If we go back to 2006 the banks said (via the BBA publicly, or directly in correspondence to customers) that bank charges reflected the 'actual costs' to the bank of a customer going overdrawn without permission. This explanation was further refined by the banks as the 'manual intervention' justification, whereby one had to factor in the 'staff time’ involved in looking over a customers' personal account when they incurred unauthorised transaction charges.

By 2007, many banks had began to re-draft their standard terms and conditions of contract to remove references to 'default charges', and introduce a new explanation and justification for bank charges. Customers were told charges were 'fees' for the bank considering an informal application for an overdraft, which could either be declined or approved. But either way, the bank would impose a fee for this service. Ultimately, if it had not been for the OFT's test case, the public would have never learned the truth about what bank charges paid for.

If we turn now to the question of whether bank charges cause 'a significant imbalance in the parties rights and obligations under the contract to the detriment of the consumer' it is evident that the standard terms of UK banking contracts compel a minority of customers to subsidise the current account costs of the majority of customers.

This has never been explained to those customers – either at the point of opening an account, after the account has been opened, or when fees are increased. Indeed as already noted, the banks have been highly evasive on the true purpose of charges. It seems obvious to suggest that a contractual charging structure which results in 12 million customers cross-subsidising 42 million other customers, must place subsiding customers at a significant disadvantage contractually. It would clearly be a matter for the court to decide whether this contractual obligation to subsidise was truly a significant imbalance to the detriment of the consumer.

However, we could certainly provide considerable evidence from case files (which could include a whole host of advice agencies and consumer organizations up and down the country) to show how this contractual position resulted in extremely serious consumer detriment.

To give but a few examples of the effect that a cross-subsiding bank charging structure in contracts has on customers:

• Consumers are trapped within a cycle of debt, whereby once charges are applied to a customer’s account this results in an ongoing monthly deficit, resulting in ongoing monthly charges and interest, with the process locking the consumer into a financial position which they cannot easily escape from;
• We could provide evidence to show that the charging structure was most commonly applied to vulnerable consumers – whether through reason of illness, relationship breakdown, social care problems, unemployment, loss of overtime, redundancy, temporary drop in household income, consumers affected by the recession, or credit crunch – and that charges exacerbated/directly led to either mental health problems and/or financial difficulties for vulnerable consumers;
• We could provide evidence which showed that the charging structure placed consumers at risk of mortgage repossession or eviction, by reducing their ability to meet payments to their mortgage or rent; and
• That the charging structure resulted in some consumers being without any money for temporary periods, resulting in short periods of absolute destitution, and the inability to provide for staples such as food and heat.

[Sapphire]

Re: OFT v Banks Judgment 25th November 2009 - 9.45am- Supreme Court - Test case

When the UK banks gave evidence to the House of Commons Treasury Committee on how bank charges were calculated they said: "[bank charges] are going to pay for all the people we have who pursue debt, collect debt, speak to customers and chase payments. The way these charges are arrived at is by taking these total costs and making some assumptions about the volume that is going to come through to arrive at the individual charges" (House of Commons, 2nd report, 25 January 2005, paragraph 50: http://www.parliament.the-stationery-office.co.uk/pa/cm200405/cmselect/cmtreasy/274/27405.htm).

This explanation is entirely different to what the banks told the court in the OFT's test case. As Lord Walker summarises in his judgement in the Supreme Court’s decision, the 12 million UK customers who pay bank charges generate 30% of the banks' total revenue stream from current account customers and cross-subsidise 'free if in credit banking' to 42 million other UK customers who never (or very rarely) incur charges. To put it simply, one customer in the UK will pay for four other customers' retail banking service; and in Govan Law Centre experience, the customer who has to pay these charges can ill-afford them.

Stupid question time (well you know me).

If the banks told the House of Commons Treasury Committee one thing and then told the Court in the OFT test case another thing, does that mean that they have committed perjury ?

[EXC]

Re: OFT v Banks Judgment 25th November 2009 - 9.45am- Supreme Court - Test case

When the UK banks gave evidence to the House of Commons Treasury Committee on how bank charges were calculated they said: "[bank charges] are going to pay for all the people we have who pursue debt, collect debt, speak to customers and chase payments. The way these charges are arrived at is by taking these total costs and making some assumptions about the volume that is going to come through to arrive at the individual charges" (House of Commons, 2nd report, 25 January 2005, paragraph 50: http://www.parliament.the-stationery-office.co.uk/pa/cm200405/cmselect/cmtreasy/274/27405.htm).

This explanation is entirely different to what the banks told the court in the OFT's test case. As Lord Walker summarises in his judgement in the Supreme Court’s decision, the 12 million UK customers who pay bank charges generate 30% of the banks' total revenue stream from current account customers and cross-subsidise 'free if in credit banking' to 42 million other UK customers who never (or very rarely) incur charges. To put it simply, one customer in the UK will pay for four other customers' retail banking service; and in Govan Law Centre experience, the customer who has to pay these charges can ill-afford them.

Stupid question time (well you know me).

If the banks told the House of Commons Treasury Committee one thing and then told the Court in the OFT test case another thing, does that mean that they have committed perjury ?

I don't think it does because what they actually said in court (which is what counts in perjury) was right ie it is a cross subsidy and of course this is backed up by the OFT's Market Study findings.

[PocketTheDifference]

Re: OFT v Banks Judgment 25th November 2009 - 9.45am- Supreme Court - Test case

But surely they aren't allowed to charge me to collect somebody else's debts... I never agreed to that, and I thought what they where taking money of me was becuase my dds bounced or somthing like that, Plus Ive never in my entire life signed for that (I didnt open my account) They are foolish!! Also I would like to ask one of you members, I have "Advantage Gold" Which was put on for 3 months trial..However I have recently found out (and has accoured me going overdrawn) that the adcantage gold account has stuck and they are charging £13 a month for this, when I asked them to proove I asked for it full time (which I didnt) they changed subject, stated they have to look into it etc surely I can contest against that somewhere? (I would like them to give me all that cash back aswell)

[Amethyst]

Re: OFT v Banks Judgment 25th November 2009 - 9.45am- Supreme Court - Test case

We, Beagles and the other smaller sites, are working with MSE, PC and CAG. MSE have funded Mike Dailly (Govan Law and bank charges campaigner amongst other things) and Raymond Cox QC (fountain court Fountain Court - People - Raymond Cox QC ) to write the new POCs (currently with defending strike out action and claims from banks in mind ) We have a draft our own POC to use in the meantime which should be confirmed this afternoon and this will be open for the other free consumer sites to utilise as needed. The consumer groups are also beind a possible class action on behalf of consumers and further news on this will be announced as it develops.

We cannot rush into anything as this is a very technical judgment, the OFT have admitted that the case went wrong and off of the wrong track when 5(1) was taken out, and discussions are continuing with them on the way forward.

The BBA and FSA are keeping an eye on the banks actions and we will continue to pressure the banks to hold fire until the OFT has made a decision on their next steps.

So we're stronger, but the advice is still to hang fire.......

[PocketTheDifference]

Re: OFT v Banks Judgment 25th November 2009 - 9.45am- Supreme Court - Test case

Nice to hear positives!! First Decent note from anyone on here in a while, Actualyl have faith again!! Thanks AME!

[tomterm8]

Re: OFT v Banks Judgment 25th November 2009 - 9.45am- Supreme Court - Test case

I don't think it does because what they actually said in court (which is what counts in perjury) was right ie it is a cross subsidy and of course this is backed up by the OFT's Market Study findings.

But doesn't that imply that what they told the select committee may have been incorrect? Knowingly telling a select committee an untruth may constitute a contempt of parliament.

[charitynjw]

Re: OFT v Banks Judgment 25th November 2009 - 9.45am- Supreme Court - Test case

Well said, Amethyst.

This is worth a read:-

http://uk.biz.yahoo.com/26112009/389...ling-mean.html

cnjw

[witch1]

Re: OFT v Banks Judgment 25th November 2009 - 9.45am- Supreme Court - Test case

:beagle:EXCELLENT news.......The fun starts here!!
Thankyou Ame,here's to the next round in the ring.The banks will at least know if they chose to read these sites that we won't let the b******S grind us down!!

[Jester]

Re: OFT v Banks Judgment 25th November 2009 - 9.45am- Supreme Court - Test case

But doesn't that imply that what they told the select committee may have been incorrect? Knowingly telling a select committee an untruth may constitute a contempt of parliament.

Hmm...maybe an open letter to Gordon Brown via the press might have the desired effect there. After all, if the press jump on it (and let's be honest they have no love for the banks) then maybe Brown would be forced to ask them why they lied to Parliament ?