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

[Amethyst]

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

Quick question re subsidising current account. Would the interest foregone on credit balances to cross subsidise the current account have any weighting at all?

post 15 back of OFT Test Case on Bank Charges ......from House of Lords to Supreme Court - Page 30 - Legal Beagles

[Ruby]

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

Hi Guys, been silent for a few days. On Thursday 'a man in a white van' shunted me in my car and left me with whiplash and bruises! I am so greatful my kids were not in the car with me.

I just received a letter from RBS yesterday, dated 25th November . I am in complete shock with this bank. A week ago a member of staff confirmed that I will be receiving a 'letter of offer' on the back of my financial hardship claim. This letter I have just received reads as follows:

I refer to recent correspondence in relation to your financial hardship. Your request has been assessed and confirmed. This arrangement can continue, if required, until the result of the Office of Fair Trading and UK Banks court case outcome is known.

Once the legal proceedings between the OFT and the banks finish, we will resolve your complaint regarding bank charges as quickly as possible.

I am so fed up of receiving 'get lost' letters from this bank. It started with four letters stating the statute of limiations (I forwarded them onto the FSA) and now this!

I have a closed account with this bank dating from 1991 to 2003 and another account which is still open but I do not use. I did receive an interim payment in June against the open account, however that is all it was and I know that there are far more charges to be refunded.

Anyone got any suggestions?

[Amethyst]

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

Did you offer them a payment arrangement on the debt in your hardship letter ? (just wondering what - '' This arrangement can continue, if required, '' refers to.

Glad to hear you did forward those letters on to the FSA, I think they were quite a blatant breach of the waiver terms.

Glad you are okay after your White Van man incident xxxx ((((((hug)))))))))

[EXC]

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

The judgment was discussed on BBC's Question Time and includes Lord Falconer QC accusing the banks of operating a 'cartel'.

Scroll down to chapter 4 - 'Banks' BBC - BBC One Programmes - Question Time, 26/11/2009

[borgbaiter]

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

anyone left still likes banks !!!

they seem to be lepers

[Amethyst]

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

isn't marcus lovely - get the banks to bail us all out individually lol.

Question if I may about competition enquiries - can they look at historical competition or just current competition.

ie. If the banks colluded in the past to all have the same system and level (give or take a couple ££) but are now all (remarkably hmmm) using different systems and different fees - can the competition enquiry be on the previous situation and can, due to that, that result in a refund, or simply a slap wrist don't do it again situation ?

[borgbaiter]

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

competition laws cant refund anyone ever can they. they only have the power (alegedly) to fine and stop the activity.

[Amethyst]

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

and as the activity has stopped (alledgedly) can they still fine ? or just a doh ! should have done an investigation years ago ?

[EXC]

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

Question if I may about competition enquiries - can they look at historical competition or just current competition.

Yes I'm sure they can. The OFT themselves launched the investigation into JJB sports and others under competition regulations for price-fixing replica football shirts and fined JJB £8m for breaches going back years I think.

And of course on the strength of that Which? launched a Representative Action on behalf of consumers that had purchased the shirts which resulted in them obtaining damages of £20 per shirt.

[grimbell]

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

They also did the milk price fixing and fined the companies last year although the offence happened some years earlier.............and the one into the construction firms.

[EXC]

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

They did and it's worth remembering that one of the possible outcomes of the OFT's Market Study into Personal Current Accounts was a full blown reference to the Competition Commision and although they've announced most of their findings on transparency and switching etc, the OFT reserved their findings on charges until after the Supreme Court judgment so on a competition level the banks are certainly not out of the woods yet.

[Amethyst]

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

from appeals hearing

SUMPTION There may be
20 circumstances in which cross-subsidy is objectionable in
21 competition terms, because there are circumstances in
22 which a cross-subsidy can be used as a means of tying up
23 part of the market and inhibiting entrants, and so on.


The difference, in practical terms, between treating
15 insufficient funds charges as a competition problem and
16 treating them as an unfair terms problem is quite
17 important, because a competition problem, if it is found
18 to exist, can be remedied under legal powers which
19 operate prospectively.

20 A chapter 4 enquiry could lead to a structural
21 alteration of the way in which bank charges operate,
22 which could -- I'm not suggesting it should -- for
23 example, include forcing a move to general transaction
24 charges.

It would be a brave regulator that did
25 anything quite so unpopular, as anyone who recalls the
40
1 outburst when it was proposed to introduce fees for the
2 use of ATM machines four years ago will no doubt
3 remember, but that would be something within the powers.
4 But the competition powers do not render
5 unenforceable existing contracts unless they result from
6 collusive agreements contrary to article 81 or, in
7 certain cases, from an abuse of a dominant position
8 under article 82.
9 Now, the unfair contract terms legislation is quite
10 different, because that renders unfair terms in existing
11 or past contracts unenforceable. Money paid by virtue
12 of them would, therefore, in principle -- in
13 principle -- be repayable in an action for restitution
14 subject to any defences arising from the particular
15 contractual relationship, such as change of position or
16 settled accounts, and that would be the position, in
17 principle, going back up to six years.
18 Now, we submit that in trying to attack insufficient
19 fund charges under the directive and the regulations,
20 instead of relying on their competition powers, the OFT
21 have taken a fundamentally false turn which has
22 enormously raised the financial stakes, and I also
23 suggest that many of the points my Lord, Lord Walker,
24 and my Lord, Lord Mance, have put to me in the last few
25 minutes are, in fact, points which come within the
41
1 proper domain of competition law after proper enquiry
2 into how this market actually works.

which makes me think the banks would prefer competition to UTCCR

[Tools]

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

One reason is because they would be dealt with prospectively and not retrospectively unless...

competition powers do not render
5 unenforceable existing contracts unless they result from
6 collusive agreements contrary to article 81 or, in
7 certain cases, from an abuse of a dominant position
8 under article 82

[natweststaffmember]

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

Could a scenario exist where it is referred to the Competition commission and is still unfair for consumers or is it one or t'other?

[Tools]

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

Just a reminder for everyone

OFT vows to pursue 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

The Office of Fair Trading (OFT) will still pursue bank overdraft charges as unfair, even if it loses the current legal appeal in the House of Lords.
The threat was made by Jonathan Crow QC, for the OFT, on the final day of an appeal before five Law Lords.
Seven banks and one building society are trying to overturn two previous rulings that would let the OFT investigate their overdraft fees.
Jonathan Sumption QC, for the banks, ridiculed the OFT's concerns.
He said they were part of a " developing saga" which he suggested had no basis in law.
Worried
Mr Crow ended his submission to the Lords by pointing out that the OFT was not just concerned about the high cost of bank charges.
The OFT is concerned that banks are capitalising on a mistake


Jonathan Crow, QC

The OFT was, he said, also worried about the way bank accounts and their charges operated in practice.
"This relates to the interplay between the amount and the fact the customer does not truly consent to the charges," he said.
He argued that bank customers were at a disadvantage at two stages: when they first opened an account and when they triggered the overdraft fees.
He listed some of the problems that bank customers faced.
He argued that they typically did not study the terms and conditions of their accounts; had no opportunity to opt out of their contract with their bank; could not work out in advance when the fees might be imposed; would find they were triggered without an explicit request to the bank for an overdraft; and often happened by mistake.
"The OFT is concerned that banks are capitalising on a mistake," he said.
'True consent'
The Law Lords will now consider their judgement and may refer some issues to the European Court of Justice.
That would further delay a final judgement on the OFT's jurisdiction, in a legal process that started in July 2007.
At stake is the currently frozen ability of millions of customers to demand that their banks refund overdraft fees they consider too high.
For the banks, an adverse judgement could lead to them repaying billions of pounds in past charges, and foregoing income of more than £2bn a year.
Jonathan Sumption rejected the OFT's reasons for keeping its campaign against bank charges going, even if it lost the appeal.
He said it was "quite impossible" for the OFT to use the concept of "true consent" in any further action over bank charges without re-writing the European directive on unfair contract terms.
"True consent is simply not the method by which the directive seeks to give effect to consumer choice," he said.
Bargain
During the morning of the third day of the appeal, Mr Crow attacked the banks' claim that their charges were so central to the operation of current accounts that they fell outside the scope of the 1999 consumer contract regulations.
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

The issue at stake is whether or not these regulations, which derive from European legislation, allow the OFT to scrutinise bank charges.
The banks argue that as their overdraft fees are part of the price paid by customers for having a current account, then they necessarily fall outside the scope of the regulations.
But Mr Crow argued 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 in fact 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 overdraft 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.
None of these conditions applied, he argued.
"Penal" conditions
Mr Crow accused the banks of "cosmetically rewriting" their terms and conditions in the past couple of years to disguise the penal nature of their overdraft charges.
He said that most banks had rewritten their terms and conditions to remove any suggestions that consumers were not allowed to go overdrawn and would be penalised for doing so.
One that still does is the Nationwide building society.
He pointed out that its terms and conditions stated explicitly that a customer can be expelled from membership for running up an unauthorised overdraft.
How could having an unauthorised overdraft be a central feature of having a current account under these circumstances, he asked.
Mr Crow went on to warn the five Law Lords hearing the appeal not to be scared of some dire warnings issued earlier by Mr 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 their appeal failed.
The structure of current accounts might just need to be adjusted, Mr Crow 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.