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

[orc]

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

Apologies if this has been posted elsewhere.

Update from FOS. It seems they are acting in isolation of OFT announcement.

Of interest- likely to reject standard/ template complaints.
Note hardship.

http://www.financial-ombudsman.org.u...k-charges.html

[EXC]

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

This has been their position since 3 December. Today they have been sending out letters to claimants saying that they won't be taking their complaints forwards.

[Yoda]

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

Maybe clutching at straws but.... thinking about what the banks told the treasury (?) what the charges were for and what theyb told the SC they were for were 2 distinct and diferent explanations. Does this not constitute fraud by false representation? or s4 abuse of position?

Fraud by false representation
(1) A person is in breach of this section if he—
(a) dishonestly makes a false representation, and
(b) intends, by making the representation—
(i) to make a gain for himself or another, or
(ii) to cause loss to another or to expose another to a risk of loss.
(2) A representation is false if—
(a) it is untrue or misleading, and
(b) the person making it knows that it is, or might be, untrue or misleading.
(3) “Representation” means any representation as to fact or law, including a representation as to the state of mind of—
(a) the person making the representation, or
(b) any other person.
(4) A representation may be express or implied.
(5) For the purposes of this section a representation may be regarded as made if it (or anything implying it) is submitted in any form to any system or device designed to receive, convey or respond to communications (with or without human intervention).
3 Fraud by failing to disclose information

A person is in breach of this section if he—
(a) dishonestly fails to disclose to another person information which he is under a legal duty to disclose, and
(b) intends, by failing to disclose the information—
(i) to make a gain for himself or another, or
(ii) to cause loss to another or to expose another to a risk of loss.

Fraud by abuse of position
(1) A person is in breach of this section if he—
(a) occupies a position in which he is expected to safeguard, or not to act against, the financial interests of another person,
(b) dishonestly abuses that position, and
(c) intends, by means of the abuse of that position—
(i) to make a gain for himself or another, or
(ii) to cause loss to another or to expose another to a risk of loss.
(2) A person may be regarded as having abused his position even though his conduct consisted of an omission rather than an act.

[Tools]

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

Already being looked into

[ed.]

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

Gotta love the FOS - ignore the law when they want, follow the law when they want.

[EXC]

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

Gotta love the FOS - ignore the law when they want, follow the law when they want.

Well that's what I thought but I've just got off the phone their Technical Department and prior to the test case they didn't actually uphold any bank charge complaints because the banks settled before they got that far.

What they said about claimants getting letters from them saying that they were not taking their complaints forwards due to the SC judgment was that these complaints were based on UTCCR and penalties. But that they would consider complaints based on other areas of law ie CCA 140.

I reckon that if you put in a complaint based on all the points presented in our Written Statement to the OFT, it would get a fair hearing.

[Amethyst]

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

Interesting..... I have set up a forum for FOS complaints - seeing as people have started getting the knock back letters. We need to sort out a response for these / appeal so that they arent sent off into court if its not entirely necessary . ( Banks Charges complaints with Financial Ombudsman or Banks - next steps - Legal Beagles )

[Centium5000]

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

Throw in 'irresponsible lending' too.

"The banks charges are structured in such a way as to constitute irresponsible lending. Charges are applied as a loan at interest without due regard to the customer's ability to repay. It is automatic and isn't subject to status."

The FOS / FSA should love that, especially as the OFT report on irresponsible lending is due in January.

Together with the arguments in our report to the OFT, there should be more than enough reason for the FOS to uphold as EXC says.
------------------------------- merged -------------------------------
If the charges are against an offset / Current Account Mortgage, the OFT guidance from 1997 might come in handy - I reckon you might be a non-status borrower if you start to incur these charges.

http://www.oft.gov.uk/shared_oft/rep.../oft192v2.pdf:

16 The contract documentation and any customer booklet or leaflet should set out clearly
any other fees or charges payable by the borrower. They should explain the purpose
and nature of the fee, the basis of calculation, the amount due, when and how payable,
and to whom. They should also indicate if any commission or other payment is
payable by the lender to the broker, and should explain the purpose and nature of any
such commission and the basis of calculation.

Did they explain the real "purpose and nature of the fee" and the "basis of calculation", or did you have to wait for the test case to find out?

[PocketTheDifference]

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

A Silly Silly, post i don't meant to disgruntle you all however, why isn't it as easy as
" its blood obvious that they're robbing us blind and are getting away with it"
Why can't sombody high rule that its theft and they have never had to charge these amounts!! Sorry increasingly fistrated. Not in hardship but could do with the money back as much as the next guy.

[Centium5000]

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

I know how you feel one****edbank_customer. However...

When the people who are 'robbing' us are more powerful than those who protect us, the protectors have to tread very lightly.

Money makes the world go round and banks make money. The government can make laws to arrest, fine or confiscate - the banks can collapse an economy.

In light of this, the OFT and the courts are doing a sterling job. Their main remit is 'fairness'.

The FSA (and the government at large) are also responsible for 'financial stability' - if the FSA had jurisdiction over these charges, which might come first 'stability' or 'fairness'?

It's very frustrating, but unless the balance of power can be restored in favour of government, private institutions (banks) will continue to take what they want, when they want and how they want.

How can we make a start on that? Ame's post is a good starting place:

Which? Future of Banking Commission - Legal Beagles

The more this topic is in the public eye, the more likely we can do something about it.

[ed.]

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

Surprised with that Exc - could've sworn the FOS has upheld a portion of complaints prior to now?

If tomorrow is deadline day, having gone through the initial response again all I can add - unless anything else clicks is the following:

CCA 1974 S87-89

Need for default notice (standard procedure)

88 Contents and effect of default notice
(1) The default notice must be in the prescribed form and specify—
(a) the nature of the alleged breach;
(b) if the breach is capable of remedy, what action is required to remedy it and the date before which that action is to be taken;
(c) if the breach is not capable of remedy, the sum (if any) required to be paid as compensation for the breach, and the date before which it is to be paid.

Right my screed - trimmed just incase it sparks other ideas

[quote]

EXAMPLE 6

Facts. The G Bank grants H (an individual) an unlimited overdraft, with an increased rate of interest on so much of any debit balance as exceeds £2,000.

Analysis. Although the overdraft purports to be unlimited, the stipulation for increased interest above £2,000 brings the agreement within section 10(3)(b)(ii) and it is a consumer credit agreement.

Therefore, a limited OD WITH unauth interest works the same I would say.

EXAMPLE 17

Facts. The manager of the C Bank agrees orally with D (an individual) to open a current account in D’s name. Nothing is said about overdraft facilities. After maintaining the account in credit for some weeks, D draws a cheque in favour of E for an amount exceeding D’s credit balance by £20. E presents the cheque and the Bank pay it.

Analysis. In drawing the cheque D, by implication, requests the Bank to grant him an overdraft of £20 on its usual terms as to interest and other charges. In deciding to honour the cheque, the Bank by implication accepts the offer. This constitutes a regulated small consumer credit agreement for unrestricted-use, fixed-sum credit. It is a debtor-creditor agreement, and falls within section 74(1)(b) if covered by a determination under section 74(3). (Compare Example 18.)

74 says - 74 Exclusion of certain agreements from Part V

(1) This Part (except section 56) does not apply to—

(a) a non-commercial agreement, or

(b) a debtor-creditor agreement enabling the debtor to overdraw on a current account, or

(3) Subsection (1)(b) or (c) applies only where the Director so determines, and such a determination—

(a) may be made subject to such conditions as the Director thinks fit, and

(b) shall be made only if the Director is of opinion that it is not against the interests of debtors.


In short Part V is the bit dealing mainly with signing of docs, prescribed terms etc etc as you'd find on a credit agreement normally THIS doesn't not apply, BUT it's still a regulated agreement because all the 'Director' is deciding upon is whether or not there should be a prescribed process is my reading.

EXAMPLE 18

Facts. F (an individual) has had a current account with the G Bank for many years. Although usually in credit, the account has been allowed by the Bank to become overdrawn from time to time. The maximum such overdraft has been is about £1,000. No explicit agreement has ever been made about overdraft facilities. Now, with a credit balance of £500, F draws a cheque for £1,300.

Analysis. It might well be held that the agreement with F (express or implied) under which the Bank operate his account includes an implied term giving him the right to overdraft facilities up to say £1,000. If so, the agreement is a regulated consumer credit agreement for unrestricted-use, running-account credit. It is a debtor-creditor agreement, and falls within section 74(1)(b) if covered by a direction under section 74(3). It is also a multiple agreement, part of which (i.e. the part not dealing with the overdraft), as referred to in section 18(1)(a), falls within a category of agreement not mentioned in this Act. (Compare Example 17.)

EXAMPLE 22


Facts. The facts are as in Example 16. On one occasion B uses the credit-card in a way which increases his debit balance with A (Credit) to £40. A (Credit) writes to B agreeing to allow the excess on that occasion only, but stating that it must be paid off within one month.

Analysis. In exceeding his credit limit B, by implication, requests A (Credit) to allow him a temporary excess (compare Example 17). A (Credit) is thus faced by B’s action with the choice of treating it as a breach of contract or granting his implied request. He does the latter. If he had done the former, B would be treated as taking credit to which he was not entitled (section 14(3)) and, subject to the terms of his contract with A (Credit), would be liable to damages for breach of contract. As it is, the agreement to allow the excess varies the original credit-token agreement by adding a new term. Under section 10(2), the new term is to be disregarded in arriving at the credit limit, so that the credit-token agreement at no time ceases to be a small agreement. By section 82(2) the later agreement is deemed to revoke the original agreement and contain provisions reproducing the combined effect of the two agreements. By section 82(4), this later agreement is exempted from Part V (except section 56).

EXAMPLE 23


Facts. Under an oral agreement made on 10th January, X (an individual) has an overdraft on his current account at the Y Bank with a credit limit of £100. On 15th February, when his overdraft standards at £90, X draws a cheque for £25. It is the first time that X has exceeded his credit limit, and on 16th February the bank honours the cheque.

Analysis. The agreement of 10th January is a consumer credit agreement for running-account credit. The agreement of 15th–16th February varies the earlier agreement by adding a term allowing the credit limit to be exceeded merely temporarily. By section 82(2) the later agreement is deemed to revoke the earlier agreement and reproduce the combined effect of the two agreements. By section 82(4), Part V of this Act (except section 56) does not apply to the later agreement. By section 18(5), a term allowing a merely temporary excess over the credit limit is not to be treated as a separate agreement, or as providing fixed-sum credit. The whole of the £115 owed to the Bank by X on 16th February is therefore running-account credit.

This is as clear as day to me - if anything the banks have unlawfully rescinded the contracts by breaching, lying and misrepresenting their true position under the CCA 74. These bits were not changed in the 06 Act.

All accounts and OD's operate under the CCA - the CCA is clear that exceeding limits are a breach of contract, and the bank is entitled to damages for such ie penalties, BUT they must follow the Default Notice procedure for such and they can only be (being for breach) true or genuine pre estimates of cost.

Alternatively, the Banks CAN 'waive' the breach as they argued when going for the Service Fee defence in the beginning BUT in those circumstances a term allowing payment, nullifying the breach, becomes implied into the contract IT IS NOT CORE.

Continually 'allowing' the implied term and making payment in such circumstances 'could' be argued that subsequently the term allowing the payment has become a core term (because basically the pattern of behaviour allows the customer to exceed his limits without it being a breach of contract) BUT it was still not core at the beginning of the bargain ie opening the account and given that when the contract is modified in some way it supercedes and revokes the previous contract, then denying a payment instruction reverts the account back to it's original form whereby it becomes a breach again.

The contract either stipulates payment will be made or not - consideration isn't a factor, it's either breach or waived. There is no term for consideration. but either way the DN procedure applies.

They have to tell you if it's a breach, capable of remedy or not. OR they still have to tell you whether they have waived the breach, and the additional charge/service is the remedy for breach in short.

A - it is a breach of contract if you don't have sufficient funds - ergo penalty and 2e UTCCR if they don't provide a service as B;
B - the bank can waive your breach (as they argued) AND provide a service BUT that introduces a non core term alteration allowing an overdraft which cannot be excessive under the CCA, has to be reasonable under SOGAS and could quite easily still be caught by 2e.

Either way the following argument applies I feel which I used in my 'Natwest update' letter although it can be further cleaned and tightened:

Additional Cause of Action re charges

The Master of the Rolls in the former Appeal by your clients indicated that a further course of action would be available under the Consumer Credit Act 1974, and after research I believe this to be a very appropriate addition.

Sections 87 to 89 of The Act are of major importance here, however I will limit my written interest to the salient points..

87 Need for default notice

(1) Service of a notice on the debtor in accordance with Section 88 is necessary before the creditor can become entitled, by reason of any breach by the debtor of a regulated agreement –

(a) to terminate the agreement, or
(b) to demand earlier payment of any sum,

88 – Contents and effect of default notice

(1) The default notice must be in the prescribed form and specify –

(a) the nature of the breach;
(b) if the breach is capable of remedy, what action is required to remedy it and the date before which that action is to be taken;
(c) if the breach is not capable of remedy, the sum required to be paid as compensation for the breach, and the date before which it is to be paid;

89 – Compliance with default notice

If before the date specified for that purpose in the default notice the debtor takes the action specified under section 88(1)(b) or (c) the breach shall be treated as not having occurred.

So in instances where a consumer finds themselves overlimit, exceeds their overdraft limit and breaches the terms of their agreement ‘ie to stay within agreed limits at all times’, the bank is required to supply a default notice, stating the nature of the breach, what can be done to remedy it giving 14 days to do so, or if not capable of remedy propose the sum to be paid as compensation giving 14 days to do so.

In real terms this means the Sections of The Act state in effect, 88(1)(b) your client can demand the breach is remedied, ie the account is brought back within limits or 88(1)(c) your client can demand a sum for compensation.

The Act does not state ‘and’ between (b) or (c) therefore the option is either, or. It cannot do both, and exceeding an agreed limit is obviously capable of remedy.

Section 89 in real terms states a customer’s position shall not be altered under the agreement, ie the levying of a penalty charge, unless and until the customer fails to remedy the breach – bring the account back within limits within 14 days – because if the customer complies with the default notice, the breach will be treated as not having occurred.

Now given your client does not supply default notices in such instances, and therefore give the prescribed period of time for remedy it is surely unlawful and a breach of the Consumer Credit Act 1974 to be enforcing both a remedy and a sum of compensation – whether or not a default notice is supplied.

This breach means the charges taken are unlawful, and I have another viable course of action for their return.

Both in breach with no default notice PER breach (whether or not a redeemable or irredeemable breach - ie whether they bounce or provide a service) Although that said, I'd expect argument that waiving the breach means no default is needed BUT I would say that's covered by 88(1)(b) because they still need to inform the breach has been waived/service provided/the remedy etc. But I would expect it - (my God that is a fractured sentence!) means each charge is unlawful, the banks have breached the CCA therefore 'our breach' becomes void which also means a payment for breach or a payment in remedy should not have been taken and thus should be returned.

Exactly right- BUT again the exact wording I would say means if they waive the breach, and supply a service whilst the service is the remedy it also means a charge can be made, and whilst that charge isn't penal, it does have to be reasonable - so you could argue the actual charge (irrespective of breach of service remedy) could be the same because in instances of service there is the additional rate of interest paid on top.

It basically should work like or could work like this (if I've got it right in my head )

1 - letter to say they've bounced a payment, you breached. You now have to pay the penalty of £x that will be applied in X days unless your account WAS brought back within limits on the same day or within 14 days in which case no charge.

2 - letter to say they have waived your breach because of insufficient funds. They have provided you with a service instead. The service is the remedy to the breach, but they will take the service charge of £x fro your next credit and because of the service your entire overdrawn balance now attracts a higher rate of interest BUT you have 1 month - 1 week whatever to bring your account back within normal limits or you will then breach your agreement.

I think.

I'm probably jumping the gun trying to create arguable examples, but yes you either need to be informed you have breached and have a timelimit to rectify (which absolves the breach like it never happened) or inform you you've breached, you cannot correct it, this is the fee you pay. (the service bit is just my logical next step that would be 'implied' into contract when they paid which is why it's a little hazy lol)

Because overall, their are 3 options.

Redeemable breach - no charge you rectify
Irredeemable breach - penalty levied
service given, breach waived.

Under the UTCCR the banks CAN misrepresent the true mechanism of these charges, cloak them as service fees, state they were there in the beginning etc etc - BUT the accounts operate under the CCA at all times, and the Banks cannot alter that, which means they cannot change the simple fact that exceeding limits is either a breach or they waive that and imply a term into the contract.

They can't suddenly 'change' the way the CCA operates to these accounts, despite how they change their terms and conditions and call them something different, when it's laid down in Statute in black and white exactly what they are.

I do apologise, the above isn't that easy to follow as it's just lifted from conversations elsewhere.

In other points

For the fairness angle, could the fact everybody needs a bank account, fazing out cheques in 2012 or whenever be added to the unfairness as it goes to choice. We have to have a bank account now, the banks know this and can use that 'power' to operate how they like. Goes to the original PCA response that accounts should be treated as a utility thesedays as opposed to just a service.

Sort of backs up lack of choice aswell.

Also basic bank accounts to nullify the consideration argument - there are no overdrafts allowed, so no consideration takes place. (goes to Smashers earlier comments about ringing for an approved OD and having it denied - then being charged for paying or not at unauth rates etc - there is definitely no consideration second time round because the decision has already been made, but goes to unfairness that they take the profit regardless AND there's no real reward for attempting it.)

Gets further muddied when the bank declines a verbal authorised OD but then subsequently grants one with the addition of a paid item fee.....all goes to the bank operating the contract in a many that secures them profit.

Also re basic accounts on the whole package argument, most on basic accounts are because they have severe financial trouble, so how is it fair they subsidise customers for services they can't receive themselves, and are levied with these charges in instances when it's already known they cannot have an overdraft either approved or unauthorised. They still get payment rejected fees and always have done. ie should somebody who only has access to one room subsidise others who get the run of the whole house. (not the greatest example I've ever used lol)

And the perjury angle is well covered in the collection of previous notices/defences Bud's got.

[Luminol]

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

Ive always liked this video, explains it all nicely:

Money as Debt

Although Im sure some of it is propaganda?

Lumi x

[Centium5000]

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

Ive always liked this video, explains it all nicely:

Money as Debt

Although Im sure some of it is propaganda?

Lumi x

It's all propaganda, just most of it happens to be true

[Luminol]

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

I thought as much, but if it means I can understand the financial system (the cartoons help), can't be all bad

Lumi x

[PocketTheDifference]

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

Cheers for clearing that up I just hope people can have as nice a christmas without their money in their back pockets (or bank accounts) I had plans ;p