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Day 6
For the second time I arrived at the hearing to find it well underway before the time the judge said it would start yesterday. HSBCs lead QC was just finishing his submission and I missed his answers to the under 18s questions he couldn’t answer yesterday.
Next it was the turn of Nationwide represented by Jeffery Vos. He started by saying that although most of his submission would mirror that of the other banks he would be putting forward an ‘’alternative contract analysis’’.
‘’We are not obliged to consider an unauthorised overdraft but only contractually obliged to effect a payment instruction’’. And that ‘’the bank has no obligation to honour a cheque’’. He went on ‘’the term ‘unauthorised overdraft is a misnomer. It is actually ‘unarranged’ ‘’. He referred to Barclays & Sims (1979 page 699 of judgement). He said that the OFT ‘’make great play of ‘unauthorised’’ This didn’t however, prevent him using the term ‘unauthorised overdraft’ numerous times during the rest of his submission.
‘’There are differing contractual terms for credit and debit customers. Terms alter when going in to debit and this is why regulation 62b is satisfied. A credit customer makes a loan to the bank and the difference in the interest paid and the interest the bank achieves can be regarded as the price’’.
He went through Nationwide’s 3 relevant charges:
1. Unarranged overdraft fee a month.
2. Guaranteed paid item fee £21.50.
3 Returned item fee £30.
The contract comprises of T&Cs and tariff leaflet from time to time and 2 other non-contractual leaflets. He also referred to an ‘’internal document’’ about the ‘’flexibility’’ of current accounts but felt it was only relevant to the outstanding issue of Plain Intelligible Language. The Judge wasn’t convinced it was relevant at all as PIL can only refer to customers documents.
Vos said that the OFTs view that no customer has a right to an unauthorised overdraft and as so is not a central part of the contract was wrong. ‘’But we say that it is to a debit customer’’.
‘’The UK banks pay £600m a day in unauthorised overdraft payments so it is a common method of raising finance and not, as the OFT would say, unorthodox.
On penalties he said that as no breech of contract occurs, no penalty is imposed. The judge reminded him that the T&Cs state that using a cheque guarantee card when in debit ‘’is not permitted’’. But Vos responded ‘’not contractually’’. Then out the blue the OFTs Brian doctor waved a copy of Nationwide’s ‘’Making the most of your overdraft’’ which he pointed out made a clear reference to ‘breech of contract’. Justice Smith turned to Vos, ‘’well?’’ and all Vos could say was ‘’we say it’s wrong’’. The judge didn’t pursue it but be he did make a written note.
The next bank into the breech (so to speak) was Lloyds with QC Thanki and walked the judge through their terms and conditions. He made reference to the similarity of the current November 2007 T&Cs with those of Barclays and said matter of factly (but I thought very interestingly) that he ‘’wouldn’t be surprised if they were written by the same draftsman’’.
Thanki said that charges were for a ‘request for consideration’ for an unauthorised overdraft and not the overdraft itself. He referred the judge to Cuthbert & Robarts where this ‘notion’ exists. The judge pulled him up on ‘’we will take your personal circumstances into account when considering your unauthorised overdraft’’. The judge said that would be achievable if the consideration was made by a personal banker familiar with the customer but what if that consideration was made by someone who wasn’t? Would that be a breech of contact?’’ Thanki conceded it might.
The judge then questioned the start date of the single monthly charge that the terms and conditions said was either the 2nd or some other date not specified. He said that the customer need to know as a 3 day period of overdraft could span 2 monthly periods and the customer could get ‘’clobbered, sorry, charged twice’’.
The QC said that the OFT says that an overdraft excess fee is for consideration alone ‘’but we say it is for consideration and agreeing’’. He said the OFT identifies as a penalty your responsibility not to have a cheque returned. ‘’But there is no obligation on the customer to refrain.’’
After the afternoon break Rabinowitz , on behalf of all the banks again asked the judge to schedule in the PIL and historical T&Cs issues at some point in the hearing. He said the FSA need the historical T&Cs dealt with as much as possible. Rabinowitz said there was a danger of ‘’letting loose a tirade of litigation in the County Courts.'' The judge consulted the FSAs representative at the hearing who said she would consider the banks request for the FSA to state it’s position on County Court litigation. Presumably this would be dependent on the Judges advice to the County Courts, as Rabinowitz suggested the possibility of an appeal to the judge’s recommendation.
The HBOS QC got half an hour into his submission before the judge called it a day. The hearing continues on Monday.
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