bbc news link on OFT Test Case 29/01/08 12.44

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http://news.bbc.co.uk/1/hi/business/7214814.stm

Provided as an update

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Re: bbc news link on OFT Test Case 29/01/08 12.44

OFT accuses banks over charges

By Ian Pollock
Personal finance reporter, BBC News


Brian Doctor QC is representing the Office of Fair Trading

Banks use a "strange language" to pretend their overdraft charges are fair, the High Court has been told.
Brian Doctor QC, for the Office of Fair Trading (OFT), said the language of bank contracts did not reflect "objective reality".
He was addressing the court on the eighth day of a key test case to decide whether the OFT can rule on the validity of overdraft charges.
Seven banks and the Nationwide Building Society deny their charges are unfair.
They agreed to the test case to clarify their legal position after a mass of litigation, which has seen hundreds of thousands of consumers claim refunds totalling hundreds of millions of pounds.
'Strange world'
Barristers for the lenders have told the judge hearing the case, Mr Justice Andrew Smith, that current account customers get a package of services for which they are charged a package of prices.
But Mr Doctor accused the banks' QCs of trying to "cast a spell" over the court.
"We are entering a strange world in which the banks speak a strange language, in which customers are deemed to have done one thing by doing another," he said.
Mr Doctor argued that some banks have, in the past year, been rewriting their contracts for running a current account to avoid any application of the 1999 unfair terms in consumer contracts regulations.
These charges are not prices in ordinary language - they are not services as normally understood


Brian Doctor QC

These regulations would allow the OFT to rule on the fairness of overdraft charges, as long as the charges are not fees for a service provided under the core terms of the contract.
The banks maintain their charges are indeed levied in return for a service, the provision of which is fundamental to the operation of current accounts, and therefore the regulations are not relevant.
But Mr Doctor told the court that the charges were "highly unusual, both in their contractual form and the way they operate".
As such, he argued, they could be investigated under the consumer contract regulations.
"These charges are not prices in ordinary language - they are not services as normally understood."
"The charges are not in exchange for these services," he added.
'Colourful analogies'
Mr Doctor took a swipe at the arguments that have been put forward by the banks' QCs.
Describing them as some of the finest minds at the bar, he said they had failed to illuminate the issues, despite putting forward a series of colourful analogies.
These had attempted to draw comparisons between charges for bank overdrafts and charges for night clubs, hotel rooms, builders, shoe shops, mobile phones, car salesmen and university admissions.
But Mr Doctor said that these were not accurate comparisons because in reality there are no analogies for bank overdraft charges.
Earlier in the proceedings, Mr Laurence Rabinowitz QC accused the OFT of prompting a deluge of litigation against the banks in the county courts by making what he described as "ill-judged comments" about the applicability of its ruling on credit card charges to bank charges.
Mr Doctor rejected this criticism.
BANK REFUNDS IN 2007
Barclays - £87m
HSBC - £116m
HBOS - £79m
Lloyds TSB - £36m
RBS - £81m

Source: Bank interim results


How much have the banks repaid?

He said complaints to the OFT about overdraft charges had started well before the OFT's credit card ruling was published in 2006.
"The deluge of claims is due to the fact that the banks have been refunding the claims," he said.
"Yet there have been no judgements or court orders telling them to do so."
Mr Doctor went on to quote a report on the BBC news website pointing out that the sums being reclaimed were enormous, running into hundreds of millions of pounds.
Continuing investigation
However, Mr Doctor stressed to the judge that so far the OFT had not come to a conclusion as to whether bank overdraft charges were unfair or not.
He told the court it was the OFT's duty to investigate complaints about unfair contracts and that was what the regulator was doing.
But he said the OFT was still in the middle of investigating the subject, adding that, "in these proceedings, there is no consideration of whether the charges are fair or unfair".
"We have decided nothing; we are investigating complaints; the OFT has not attacked anything yet," he said.
Mr Doctor spent much of the afternoon analysing the importance of a House of Lords ruling in 2002 in which the OFT had challenged penalty charges imposed by First National Bank.
"This provides many of the answers we urge you to take up", he told the court.
Mr Doctor argued that the lesson to be drawn from the case was that charges made for an unauthorised overdraft were "not a central feature of the bargain".
In a taste of things to come, he cited a leaflet published by Lloyds TSB entitled "Avoid slipping into the red". He described the leaflet as equating going into the red with a kind of shipwreck.
"This could hardly be the main subject of the contract," he argued
"Why would one be urged to avoid the main subject of the contract?" he asked.
Outcome
The hearing continues and is now expected to last until at least the end of next week, to allow the banks and Nationwide to respond to Mr Doctor's arguments.
It had originally been scheduled for eight days.
The outcome of the long-awaited court case could bring a significant change to the UK current account market.
If the OFT argument is upheld, it could mean banks and building societies having to return billions of pounds collected from customers over the past six years.
However, the losing side is expected to appeal, possibly all the way to the House of Lords, meaning the issue may not be resolved until next year.

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Re: bbc news link on OFT Test Case 29/01/08 12.44

I was at the OFT test case today and had the pleasure of meeting Exc. I will await his posting as he is far more eloquent than me. What I would say to ALL posters is that there is an opportunity to go to the OFT test case because there are 2 rooms with live feeds. One is the Royal Courts of Justice court 65 which today held 2 people or there is the IDRC both on Fleet Street, which had 24 chairs laid out with 2 screens, one fixed on the judge and the other on the QC. Only about half those seats were taken. So if you want to go, printout a map from the IDRC, go into the place and get a pass from one of the beautiful young ladies at the desk and go to the second floor of the IDRC in room 24 which is labelled press/public. This is a real opportunity to go and see it.The trial judge seems both a thoughtful judge and at times very humorous to boot. I will await Exc, summary and will comment if anything has been missed.

[scoobydoo]

Re: bbc news link on OFT Test Case 29/01/08 12.44

Wish I could have gone and would like to say again well done on the reporting - I sure you must have sat through an awful amount of boring exchanges - but have managed to extract and report in an understandable way. When we have all been involved for so long it would be a shame to miss this up to date news.

shame today to hear on the other site that a court did not punish barclays for ignoring an instruction not to impose charges during a stay - re-imposed the stay - and said they could now continue applying charges. But interesting that the banks reasoning was that the charges were on the whole automated and not manual.And therefore their defence was basically they could not manually interfere - so "not my fault gov" Well theres a surprise - so not expensive on labour then!

jan