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

[natweststaffmember]

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

CRAP, I just said subject to good faith.....darn it!!!

[Amethyst]

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

also

In addition, the bank has the right to keep assessing Direct Debits as a request for overdraft even if the previous requests have been declined and nothing has materially changed on the account to affect the decision.

They have to look at the account (they being the millisecond computer system) and see if anything has changed so thats also a service / consideration.

[Guest]

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

Here's one for you Nattie...

How about the fact that the bank chooses which service is provided (assess and then pay or assess and then reject) and therefore which fee the customer pays?

That's not directly related to price, it's more that the customer cannot be certain what the outcome of any trasaction will be.

The customer might not want any assessment to take place, just have the payment rejected. They don't have this option because the non-negotiated contract doesn't allow it.

The reason for the service is presumably to ensure that the customers financial commitments are paid - but what if the cost of not paying is less than the banks charge for assessment? Surely then the customer would not then want to avail themselves of the service.

By writing 'deemed request for overdraft assessment' into the contract, the bank deprives us of the choice that they have. They're working as our agent in paying out from our account so shouldn't they consider our wishes, not just impose them? To me that's a significant imbalance and to my detriment.

That's my take on Reg 5(1), don't need to touch the price with a bargepole.
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In addition, the bank has the right to keep assessing Direct Debits as a request for overdraft even if the previous requests have been declined and nothing has materially changed on the account to affect the decision.

This is surely unfair and as we can't stop them from doing this there is a clear imbalance of rights.

I agree with this and believe that the above encapsulates the argument entirely.

I made the point that the banks do this over two years ago, post #30 on this thread. Devils Advocate- why should i pay for your mistakes - Page 2 - Legal Beagles

I would suggest however, that the reason for the service is not to ensure that the customers financial commitments are paid, but to generate extra revenue for the bank.

[ed.]

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

Doesn't the argument still stand under 5 though (sorry going back to Exc's post) that even if the charges were 20p it is still a significant unfairness for only a small portion of people to pay that 20p in order to allow seemingly 'free' banking to the majority.

The price doesn't matter - it's the application of the term and the outcome of that application (ie subsidising others) that creates the unfairness. That stands alone regardless of whether it's 20p or £20.

[Tools]

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

Some excellent points made by Centium, thank you.

Also ed. I agree with you entirely, the cost is not the question, that term (no matter what the cost of it) was misrepresented to the consumer at the time of signing the agreement, the term was non negotiable and it was taken in good faith. The actual cost of that as we all know is disproportionate, if it were 20p (for arguments sake the actual cost for processing the request or dealing with the breach) then it would not be penal, it would therefore not be disputed.

The relevant terms were presented to us as (paraphrased)

• you should not allow yourself to go over your agreed overdraft limit
• if you do we will charge you to cover that
• we may consider to process your transaction but either way we will charge you

At the time of opening your account I defy anyone to say that they believed these charges would be applied to cross subsidise free if in credit banking. The understanding of Joe Public is that the banks are/were able to offer free services to creditable accounts because of the deposits being used to lend at a higher % to customers/mortgages/inter bank lending/investment. The profits generated from this and also higher interest rates on debit balances were perceived to be the banks' profit vehicle, not UOD's and the like.

The charges were understood to be a penalty, it was just that until the last 5 or so years not many people were aware this was unlawful under common law until others began to challenge them and publicise it.

Good faith and misrepresentation are separate to the price unless the price is the actual cost of dealing with the breach itself as it was originally marketed.

[ed.]

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

I agree it wouldn't be penal anymore (at all), but it would stand as an unfair term if the 'sum' raised in those circumstances offset other accounts.

ie say they charged £2.50. Real cost was closer to £2. I wouldn't consider the extra 50p penal. Same as if real cost was £18.50 and they charged the round sum of £20. It's close enough to not be penal.

But if the 'extra' 50p went to subsidising other accounts, I'd still consider that unfair.

I'd also say the charges were understood as penalties, BUT more importantly that was exactly how they were presented 'extra costs, administration, default' etc.

[Smasher]

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

At the time of opening your account I defy anyone to say that they believed these charges would be applied to cross subsidise free if in credit banking.

Better still, had anyone even heard of the phrase 'Free, if in credit banking'? Mine was just called 'Free banking'. Perhaps another reason to throw misrep at them. I'd love to see some old TV ads and leaflets and see how they described them..

[Budgie]

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

Budgie’s Report on today’s meeting with the Office of Fair Trading

Earlier this week various Consumer website groups were invited to attend a meeting with the OFT.

Legal Beagles attended today, with Exc, Budgie and Tom Brennan representing, MSE will attend tomorrow and Penalty charges on Friday, CAG, we believe, are in the process of organising a telephone conference for either Thursday or Friday. It was originally intended that all groups would attend at the same time however this was not possible owing to prior commitments.

The OFT opened the meeting by stating that they are required to make a decision regarding continuance of their UTCCR1999 investigation following the recent Supreme Court judgment. They are expecting to make this decision during December. They are currently analysing the judgment and considering the remaining legal avenues open to them. They have not yet reached a decision and are awaiting the opinion of their legal counsel. They quite clearly pointed out that they were not at liberty to go into any details regarding their decision making process for obvious reasons. Readers should therefore be aware that the OFT were not able to express any views on any matters that we raised with them today.
They did however wish to make it know to Consumers that they were aware of the public interest surrounding this matter and that they would endeavour to make their decision known as soon as possible, together with detailed explanations regarding their reasons for making that decision.

Whatever decision they eventually make will be market sensitive so it is unlikely that they will be able to give us anything more than a few hours notice ( after the financial markets close on the particular day ) of their actual announcement.

The OFT’s decision will be based upon the likely chances of success of any future litigation following on from the Supreme Court decision plus the likely impact that their decision, either way, will have upon the Consumer.

The OFT also wished to make it clear that whatever decision they make they still wish to pursue change in the market place.

The purpose of our meeting today was to allow us, as a stakeholder, the opportunity to put our views across to the OFT regarding the following key issues.

1) Do we consider that the OFT should continue with their UTCCR1999 investigations or not and for what reasons?

2) What arguments do we consider could or should be utilised in respect of Regulation 5 (1) of the UTCCR1999?

3) What other legal arguments ( non UTCCR1999 ) do we consider could or should be utilised to achieve Consumer satisfaction?

4) What do we consider the possible effects might be should the OFT decide to Continue or not continue with the UTCCR’s investigation?


Do we consider that the OFT should continue with their UTCCR1999 investigations or not and for what reasons?

We presented the OFT with our mission statement.

Absolutely yes.

The test case was only ever a part of it. Clearly the Supreme Court judgment only ruled on one single aspect of the regulations (the ‘price’) without exploring the rest. The fact that the Supreme Court offered the OFT another route under regulation 5 is significant. After all, how many last instance judgments offer the losing party an alternative? If the OFT don’t take it up, consumers will feel terribly let down by the OFT, the Consumer regulations that were designed to protect them and the process itself.
In the meantime we need the PCA Market Study findings on charging levels and structures announced and implemented. But we cannot go through another 3 years of a one sided waiver with which the banks are irrevocably protected by when it suits them but continue to ignore the OFT’s guidance on disputed accounts and pile on charges to those in genuine hardship.

The test case was initiated to provide ‘legal clarity and certainty‘. In short, it hasn’t. And as such provides the very reason why the investigation should continue.


The end result of the meeting today was that we agreed to provide a detailed written report of our response to the OFT before lunchtime on Friday of this week. We will of course post that written response on the Legal Beagles website for all users to see.

We had actually prepared quite detailed notes in advance of today’s meeting and wish to thank everyone who has contributed to the various discussions over the last few weeks and in doing so effectively contributed to the points we raised today. Those notes will be tidied and a detailed written report prepared over the next 1 ½ days.

Meanwhile, below is a short summary of the points discussed today.


What arguments do we consider could or should be utilised in respect of Regulation 5 (1) of the UTCCR1999?

Tom Brennan, Budgie and Exc, listed the various arguments that have been discussed on the various threads on Legal Beagles from before and since the Supreme Court judgment in relation to Reg 5.

Twelve (12) separate but inter-connected arguments were listed including a new key argument regarding paragraph (e) of schedule 2 to the 1999 regulations, indicative list of terms that may be regarded as unfair, “Requiring any Consumer who fails to fulfil his obligation to pay a disproportionately high sum in compensation.” The reasoning behind this key argument as well as the other eleven arguments will be explained in more detail in our full written report.


What other legal arguments ( non UTCCR1999 ) do we consider could or should be utilised to achieve Consumer satisfaction?

The other legal arguments we raised were under the following five headings

i) Misrepresentation
ii) Competition
iii) Undue Influence
iv) CCA 1974 ( as amended)
v) The penal argument revisited

Additionally, our views regarding the possibility and the mechanism of a referral to the ECJ regarding certain of the regulations under the European directive / UTCCR1999 regulations and schedules as well as issues related to the “Burden of Proof” were aired to the OFT.

Again, the reasoning behind all of the above will be explained in more detail in our full written report.


What do we consider the possible effects might be should the OFT decide to Continue or NOT continue with the UTCCR’s investigation?

We actually found this quite a complicated question to cover particularly because of the historic / present / future / contract / charges / fairness / scenarios.

Some of the key points we raised were as follows.

More detailed responses will be included in the full written report.

If OFT do not continue :

We suggested that the majority of Consumers who had incurred historic charges were primarily concerned about recovering their own historic charges but that those particular Consumers, in fact ALL Consumers, would or should also be concerned about the future situation, should the OFT decide not to continue with their investigation, as the Banks would basically be provided with virtually limitless power and negligible regulation possibilities over PCA contracts.

Additionally, there would be a huge risk of similar “clever” contract drafting in other Supplier / Consumer contracts to bypass the possibility of OFT intervention.

We suggested that should the OFT decide not to continue then the majority of those Consumers with stayed County Court claims would most likely wish to continue their claims on an individual basis. Whether they actually did so would depend upon their confidence in their own ability to litigate in person. This would of course disadvantage less able or less confident Consumers and would cause renewed chaos in the County Court system. Most Consumers pursuing their own claims in this manner would expect or hope that the Banks would settle in advance of a formal Court hearing. However, because of the complexities of the legal arguments involved these matters would quite quickly have to be taken to the High Court rather than the County Court and no individual Consumer is likely to be able to pursue this course of action owing to both cost and complexity. Such an action would have to be pursued via some form of Representative action and it is unlikely that such a Representative action could or would be entertained if there was no participation in the form of an ongoing investigation by the OFT.

Consumer Groups and individual Consumers would be forced to seek or pursue solutions to the Bank charges scenario via political and or parliamentary routes.


If the OFT continue :

Consumer Groups are mainly concerned with the issues of power and control afforded to the Banks by these contracts and would continue to have confidence and are relying upon the OFT to fulfil it’s obligations.

Consumer Groups have no confidence that the Banks would treat Consumers fairly despite their written commitment to do so.

The majority of Consumers are already disappointed by the OFT and the UK legal system and the apparent failure to provide legal clarity for these issues. The possibility exists for the OFT to repair this disappointment and stamp it’s authority as the UK’s official Regulator.

Many Consumers are frustrated at the amount of time taken to date wrt the original test case and would of course be disappointed if a further lengthy court battle were to be embarked upon. However, most Consumers would rather have an eventual solution overall rather than no clear legal solution at all.

The OFT are unlikely to ever have a more important case to administer. Virtually every UK Consumer is affected, the value, not just in monetary terms, is enormous and the potential benefits for Consumer contract regulation are extremely tangible.

The OFT would be continuing it’s investigation under the UTCCR’s, plus pursuing change in the market via it’s PCA report and or via the competition route. Plus, if it were to also consider the possibility of being joining or be joined in litigation by a Consumer Representative Action aimed at resolving historic plus non UTCCR issues together with legal redress, limitation and compensation then the OFT would not have wasted two years of cost, experience and acquired knowledge of the intimate workings of the Banks charging systems.

Most Consumers would be 100% behind the OFT continuing it’s investigation, even if the Banks continued on their so called charges reduction program and charges were reduced to say only 2p. The present status of the contract and the lack of Consumer control in the contract is unacceptable and disproportionately in favour of the Banks. Every Consumer is at risk from the future excesses of effectively unregulated PCA contracts.

Sorry, for lack of detail, at this stage, regarding the actual arguments presented. Rest assured that these will be fully detailed in the full written report which HAS to be with the OFT by Friday lunchtime.

Budgie :reindeer:

[EXC]

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

Doesn't the argument still stand under 5 though (sorry going back to Exc's post) that even if the charges were 20p it is still a significant unfairness for only a small portion of people to pay that 20p in order to allow seemingly 'free' banking to the majority.

The price doesn't matter - it's the application of the term and the outcome of that application (ie subsidising others) that creates the unfairness. That stands alone regardless of whether it's 20p or £20.

5 (1) actually states ''significant imbalance'' which would need to be established before you got to unfairness.

The OFT were playing devil's advocate here and I understand the potential problem they face.

What they were saying is that the banks could say that if the charges were just 20p, it simply couldn't be argued, with any credibility, that this would cause a significant imbalance. And that being the case, the imbalance is determined by the level of the price which would therefore fall within the 6 (2) exemption.

In answer to Centium's post:

''How about the fact that the bank chooses which service is provided (assess and then pay or assess and then reject) and therefore which fee the customer pays?

That's not directly related to price, it's more that the customer cannot be certain what the outcome of any transaction will be.

The customer might not want any assessment to take place, just have the payment rejected. They don't have this option because the non-negotiated contract doesn't allow it.''

This is exactly what I told them yesterday, that it's the lack of control that the consumer has over the order of payment instructions dealt with on any given day (and is in fact completely discretionary on the part of the banks and was established in the first test case hearing) that is cause for imbalance.

It became quite clear to me yesterday where the difficulty lays for the OFT and is neatly summed up in a couple of posts on CAG by Aequitus:

''For myself I have always felt that the UTCCRs do not sit very happily with contracts for financial services. They are aimed at contracts for holidays, car hire, double glazing and the like. A completely separate set of regulations ought to have been drawn up for financial services.........you only have to read the "grey list" to see that it was not drawn up with financial services....in mind''.

[ed.]

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

5 (1) actually states ''significant imbalance'' which would need to be established before you got to unfairness.

The OFT were playing devil's advocate here and I understand the potential problem they face.

What they were saying is that the banks could say that if the charges were just 20p, it simply couldn't be argued, with any credibility, that this would cause a significant imbalance. And that being the case, the imbalance is determined by the level of the price which would therefore fall within the 6 (2) exemption.

I see where you/OFT are coming from there but to me there's no material difference. Requiring me to pay any sum (20p or £20) that is levied in a conditional circumstance, that has a % that goes to subsidising accounts is an imbalance ergo unfair.

I know where your coming from though because it's hard to divorce it from the sum itself and not actually raise the sum when mentioning it.

[PocketTheDifference]

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

Is that actually true that a few of us pay fees and the rest just sit and enjoy free banking, because that SURELY is a clear cut misfairness.
Also I just wanted to ask .,,which should have been the strongest argument the first case is it 6 (2) or the one you want to persue now 5??
Thanks

Thanks for the report aswell Ame

[ed.]

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

It's the whole package argument and subsidy the banks raised. Which is a nonsense in itself because everyone pays....foregone interest came to about 4.6 billion whereas charges 2.6 from memory. So 'in credit' accounts don't need a subsidy.

Reg 6.2 nobody was really using because that presupposed these sums weren't penal and were for a service. Reg 5 was always the thrust.

[EXC]

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

I'm bumping this from another thread in the forum made by Budgie yesterday.

Dear All,

I urgently need copies of either charge notification letters from Banks, dated between 2001 and the present day.

Ideally the target is to build up a collection of such letters for each bank, for each account type and for each year ( covering the various changes in versions of the relevant terms and conditions for each bank ).

Additionally copies of any responses from Banks in relation to preliminary reclaim letters or LBA's would also be extremely useful.

What I am specifically looking for are written statements within those letters detailing exactly what the charges were in respect of, confirming a breach of contract, failure to fulfill obligations or other key information.

Please post copies up on this thread but make sure you remove any personal identification information first.

Thanks Budgie

Charge Notification Letters Required - Legal Beagles

We'd be very grateful if anyone could respond to it today - we have to get it to the OFT by the morning.

During yesterday's meeting it emerged that the OFT would be very interested in seeing evidence that links the charges exclusively to a failure of obligation on the part of the account holder to keep their account in credit, after Budgie had read out extracts of his own letters from Halifax.

While I'm at it I'd like to thank Budgie on his performance yesterday. His preparation for the meeting was superb and he is a credit to the campaign and Legal Beagles.

[Budgie]

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

Twelve (12) separate but inter-connected arguments were listed including a new key argument regarding paragraph (e) of schedule 2 to the 1999 regulations, indicative list of terms that may be regarded as unfair, “Requiring any Consumer who fails to fulfil his obligation to pay a disproportionately high sum in compensation.”

Additionally, our views regarding the possibility and the mechanism of a referral to the ECJ regarding certain of the regulations under the European directive / UTCCR1999 regulations and schedules as well as issues related to the “Burden of Proof” were aired to the OFT.

I see where you/OFT are coming from there but to me there's no material difference. Requiring me to pay any sum (20p or £20) that is levied in a conditional circumstance, that has a % that goes to subsidising accounts is an imbalance ergo unfair.

I know where your coming from though because it's hard to divorce it from the sum itself and not actually raise the sum when mentioning it.

It's the whole package argument and subsidy the banks raised. Which is a nonsense in itself because everyone pays....foregone interest came to about 4.6 billion whereas charges 2.6 from memory. So 'in credit' accounts don't need a subsidy.

Reg 6.2 nobody was really using because that presupposed these sums weren't penal and were for a service. Reg 5 was always the thrust.

Charge Notification Letters Required - Legal Beagles

During yesterday's meeting it emerged that the OFT would be very interested in seeing evidence that links the charges exclusively to a failure of obligation on the part of the account holder to keep their account in credit, after Budgie had read out extracts of his own letters from Halifax.

It became quite clear to me yesterday where the difficulty lays for the OFT and is neatly summed up in a couple of posts on CAG by Aequitus:

''For myself I have always felt that the UTCCRs do not sit very happily with contracts for financial services. They are aimed at contracts for holidays, car hire, double glazing and the like. A completely separate set of regulations ought to have been drawn up for financial services.........you only have to read the "grey list" to see that it was not drawn up with financial services....in mind''.

All of the above points are related and integral.

Even if the UTCCR1999 regulations were not intended to originally cover financial services such as PCA's ( as Aequitas contends ) then it is unthinkable that the intention of 6.2 would be to totally preclude an assesment of fairness as to price under Regulation 5 (1) and per the grey terms in Scehdule 2by virtue of Regulation 6.2. Doing so would effectivley wipe out several of the so called grey terms from Schedule 2 ( the price related terms ) including (e). Regulation 6.2 must have originally been intended as a stand alone clause in respect of a limited number of potential issues not an all encompassing get out of jail free clause.
There is certainly a case here for referral to the ECJ. Especially as we are actually talking here about an excluded assessement under Reg 6.2 and not excluded terms.

The 'test case' has finished and there is no possibility of a referral to the ECJ directly under Reg 6.2. However, it would be feasible for a new case to be actioned under Regulation 5 with an integral referral to the ECJ, if necessary, that Regulation 5 (1) together with the relevant grey terms in Schedule 2 ( including (e) ) may include an assessment under price for reasons other than those intended by Regulation 6.2. The referral to the ECJ could also incorporate other terms including those relating to Burden of proof.

The other reasons would include ( for example ) arguments related to Schedule 2 para e “Requiring any Consumer who fails to fulfil his obligation to pay a disproportionately high sum in compensation.”

A more detailed explanation will be included in the full written report.

[Centium5000]

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

5 (1) actually states ''significant imbalance'' which would need to be established before you got to unfairness.

The OFT were playing devil's advocate here and I understand the potential problem they face.

What they were saying is that the banks could say that if the charges were just 20p, it simply couldn't be argued, with any credibility, that this would cause a significant imbalance. And that being the case, the imbalance is determined by the level of the price which would therefore fall within the 6 (2) exemption.

I see where you/OFT are coming from there but to me there's no material difference. Requiring me to pay any sum (20p or £20) that is levied in a conditional circumstance, that has a % that goes to subsidising accounts is an imbalance ergo unfair.

I know where your coming from though because it's hard to divorce it from the sum itself and not actually raise the sum when mentioning it.

I think there's an subtle yet important distinction here about how we're talking about price and what Reg. 6(2) is about. The banks' legal teams will know the mischief this will be causing as it appears a difficult nut to crack. However...

What 6(2) actually goes to is the fact that in economics prices must be determined by the market and a court / government shouldn't ordinarily apply a cap as this would be a market distortion. A price cannot be 'unfair' so far as we can decide whether or not we pay it - i.e. whether the service is worth the consideration to us.

That means we can't argue about the fairness of the price or any part of it, as ruled by the SC, only choose not to use the service. All good.

The imbalance we're pointing to is that the choice not to avail ourselves of the service that triggers the charge has been removed. The service is 'bundled' into the non-negotiated contract so our only choice would be to not enter the contract at all i.e. not use banking services!

Alternatively the banks might suggest we manage our finances to avoid triggering the charges, however this misses the point. It would be reasonable to presume we ordinarily do this and the charges are triggered only when we don't foresee the credit shortfall. To suggest otherwise is to suggest that customers are always deliberately or negligently triggering the charges. Good luck with that argument

Now in the case of a 20p charge, the charge itself may not be significant (which is what the argument is designed to draw us to) but the fact remains we have no choice but to pay it and have the service rendered. It's significant because the service itself may be undesirable.

We may not want to go into / further into debt because of the higher interest rate, the impact on our credit score or the relative benefit of having the payment made against the cost of non-payment.

We may just want the request to be declined.

The bank effectively deprives us of our normal right to opt for a service and unnecessarily so; there is no good reason to assume we want an overdraft assessment to be made unless we requested the contractual term ourselves.

When transacting the bank acts on our behalf, we don't act on theirs, and so it is unfair for them to impose this condition unless it is strictly necessary - it clearly isn't.

We can talk about price as long as it isn't the basis of our claim that a term is unfair. I can imagine the banks would prefer we didn't realise this; it'd be like The Matrix - "What good is a phone call Mr. Anderson if you are unable to speak?".

I must stop typing these essays, my fingers are starting to ache! Hope you guys think it was worth it
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Sorry Bud, didn't see your post before I'd submitted.