OFT WIN

[argentarius]

Re: OFT WIN

Surely a cartel is where a group of similar companies join together to control prices and limit competition, for collective gain. This is exactly what the banks have done for years by following each other in raising their penalty charges. I can remember when credit cards went from 12 per item to 15, then 20, with Citibank taking a lead at 25. These jumps were generally done at different times but often by the same amounts, not governed by anything other than what they could get away with and what someone else was charging. The 'Ethical Bank' (Co-op) and the mutuals like Nationwide could have risen above all this and displayed more integrity, yet they have been no different in their infinite greed and the treatment of their customers than the other banks.
The idea of this is to keep an even keel, where the consumer has nowhere to turn where the charges are fairer or more realistic. Interestingly, whilst banks put PCA charges up to 39 in some cases, noone has seemed willing to be the first to exceed the 40 limit, despite the claims that the charges represent ever-increasing costs.
If this isn't a cartel what is it?

Isn't price fixing cartels where companies get together and decide upon a price of something and agree to keep to that price, as opposed to following what others in the same market are doing ?

I agree with Amethyst. Unauthorised overdraft charges do differ between banks - both paid item charges and bounced item charges vary. Something isn't a cartel simply because the prices for items end up being similar.

Only someone from the banking industry would have the chutzpah to say this. The OFT said no such thing. They asked the banks (as I recall without checking detail) to consider what was a fair charge, whilst setting the limit for action at 12. The banks, of course, did nothing for fairness but have continued to charge this because they know they can get away with it. Egg have even charged 16 and gotten away with it because the regulators are so unwilling to enforce anything and the banks know this.
I have it in writing from one CC company in response to a claim that the OFT said 12 was a fair price. A blatant lie, yet they paid up in full because they could not defend the charge.

You are of course correct that the £12 "cap" is merely a level of fee under which the OFT are unlikely to take any enforcement action, rather than a statement of what is reasonable.

But the OFT's comments about this cap (in your later quote) are all based on the fee being a penalty, a view which hasn't been tested in court.

The fact that an individual card company has settled a case out of court isn't evidence of the case being valid.

It is still open for a court to decide on the true level that the fee should be hence reclaims going ahead because it isnt a legal judgement.

Exactly.

[argentarius]

Re: OFT WIN

Just wondered any of you guys opinion on the Sale of Goods and Services Act s.15 applying to the level of charges now they are deemed a service ?

I may be being stupid, but I don't understanding your question. Wasn't the point that non-payment of a transaction was not considered by the judge to be a service, meaning that there was no basis for a charge?

Please let me know if I'm getting the wrong end of the stick!

[Amethyst]

Re: OFT WIN

I am thinking of the charge for paying a DD when it takes you over the overdraft and the resultant charge (paid item fee), as opposed to the unpaid fees.

[EXC]

Re: OFT WIN

From: EXC
Sent: 29 April 2008 14:30
To: Kate Farrow OFT
Subject: Quick question



Hi Kate

A quick question:

Would your eagerly awaited decision on the fairness of the charges cover historical T&Cs or at least have a read-over to them?

If not, it would appear that the test case outcome would have no relevance to the current cases on hold and it was, after all, the clarification of the legal issues as to why these claims were waived and stayed.

This is a major concern and some clarification would be appreciated.


Many thanks

Nick



----- Original Message ----- From: Kate Farrow OFT
To: EXC
Sent: Tuesday, April 29, 2008 3:09 PM
Subject: RE: Quick question

Hi Nick

Our Q&As and press release say that there may need to be further hearings to determine any outstanding preliminary issues arising from the judgment. Such issues include the read-across of the judgment to historical T&Cs and whether further court hearings may or may not be necessary on that aspect. This will be discussed at the forthcoming Case Management Conference on 22 May.

Regards,
Kate

[Budgie]

Re: OFT WIN

EXC, see my post 129 on this thread !

BTW - I presume that Judgments in respect of the Historic terms and the basic bank accounts will follow shortly and in time for discussion at the case management conference on 22nd May. I couldnt find any detail as to timescales for these in the judgment. However the Judge did say on the final day of the test case that he would hope to issue guidance perhaps within one month of his initial judgment.

In essence all we have so far is a judgment on present terms which is likely to be somewhat irrellevant for the future as the banks are going to change them all again anyway either before during or after the appeal process. Of course we need to fight this and trust that the OFT will continue to fight.

However, from the historical point of view we are no further forward than we were a week ago. OK we can probably assume that the judgment wrt UTCCR 1999 will be carried across. I am actually quite hopefull that the Common Law Penalty battle will actuall be WON by us here if not for all historical terms then certainly for the basic accounts.

Can anyone please let me know where the following quote comes from in Hone's statement ( if it is indeed a quote )

Clearly these account need to be assessed even more that the “normal” accounts. If the banks do not (my emphasis added) allow their customers to arrange an overdraft yet customer can and do go into “unauthorised” overdrafts then clearly this is a breach of contract, therefore I would submit that this situation clearly supports the penalty argument as well as the Unfair Terms Argument.

[EXC]

Re: OFT WIN

Well it certainly sounds like it could be decided at the CMC. It's going to be a corker to watch.

[EXC]

Re: OFT WIN

I don't think it is a quote

[Budgie]

Re: OFT WIN

It reads like a quote......

Why would he state that he has added the emphasis.

I will ask him LOL

and yes please book seats for CMC

Budgie

[Budgie]

Re: OFT WIN

I have been having interesting debate on another site with regards to Para 323 of Judgment.

Would appreciate peoples views on this paragraph.

Some are arguing that it gives an indication that Judge is intimating that he might be inclined to allow the Common Law aspect.

I can see a number of different interpretations of this paragraph. Is it just badly written or has Andrew Smith deliberatly left it this way.

323. I therefore conclude that none of these provisions which the OFT has identified means that the customer is under a contractual commitment such that Relevant Charges could be a penalty for breach of the commitment, and so unenforceable at common law. I have reached this conclusion without resort to Regulation 7(2) of the 1999 Regulations. However, if there were doubt about the meaning of these provisions, they would be given the interpretation most favourable to the consumer. This would mean that they would be construed so as to avoid customers being under any contractual commitment. (It might be suggested that it would be most favourable to consumers to interpret them so as to give rise to contractual commitments so that they might enjoy the common law protection relating to penalties. However, in my judgment, Regulation 7(2) operates similarly to the principle that a contract is to be construed contra proferentem. This does not mean that, if there is ambiguity, the court will invariably adopt the meaning that turns out in the circumstances that have arisen to be less favourable to the party putting the contractual terms forward, but simply that it will construe the contractual terms themselves so as to be the more onerous upon him: see Skillion plc v Keltec Industrial Research Ltd, [1992] 1 EGLR 123 at p.126 per Knox J.)

[scoobydoo]

Re: OFT WIN

One quick comment on the comment from EXC that all this could give the banks a rest bite for dealing with claims. If they have made any future provision for paying out against claims for charges then "money goes to money " and during this time they will be gaining a large amount of interest on this provision.

[argentarius]

Re: OFT WIN

I am thinking of the charge for paying a DD when it takes you over the overdraft and the resultant charge (paid item fee), as opposed to the unpaid fees.

Thanks for the clarification and I'm now catching up with your thinking!

I don't think that s.15 applies, as the fees you are talking about are determined before the service is used, and notified to the customer.

Doesn't s.15 apply only where the contract is completely vague about the cost of the service and hence there is a legal obligation for that cost to be reasonable?

[argentarius]

Re: OFT WIN

I have been having interesting debate on another site with regards to Para 323 of Judgment.

Would appreciate peoples views on this paragraph.

Some are arguing that it gives an indication that Judge is intimating that he might be inclined to allow the Common Law aspect.

I can see a number of different interpretations of this paragraph. Is it just badly written or has Andrew Smith deliberatly left it this way.

323. I therefore conclude that none of these provisions which the OFT has identified means that the customer is under a contractual commitment such that Relevant Charges could be a penalty for breach of the commitment, and so unenforceable at common law. I have reached this conclusion without resort to Regulation 7(2) of the 1999 Regulations. However, if there were doubt about the meaning of these provisions, they would be given the interpretation most favourable to the consumer. This would mean that they would be construed so as to avoid customers being under any contractual commitment. (It might be suggested that it would be most favourable to consumers to interpret them so as to give rise to contractual commitments so that they might enjoy the common law protection relating to penalties. However, in my judgment, Regulation 7(2) operates similarly to the principle that a contract is to be construed contra proferentem. This does not mean that, if there is ambiguity, the court will invariably adopt the meaning that turns out in the circumstances that have arisen to be less favourable to the party putting the contractual terms forward, but simply that it will construe the contractual terms themselves so as to be the more onerous upon him: see Skillion plc v Keltec Industrial Research Ltd, [1992] 1 EGLR 123 at p.126 per Knox J.)

IMHO, Budgie, I don't think it's badly written. In fact I think it's quite clear and it doesn't mean what "some are arguing".

The key point is:

This would mean that they would be construed so as to avoid customers being under any contractual commitment.

The section in brackets - and it's in brackets because it is there just to provide supporting detail, rather than being key in itself - explains why he says what he says in the sentence I quote; but that sentence is the whole story. If there WAS any uncertainty (and he isn't sure that there is) then that uncertainty would be construed against the contractual obligation the customer is under to not go overdrawn, i.e. removing them from that contractual obligation.

And if the customer isn't under a contractual commitment to refrain from going overdrawn, then going overdrawn isn't a breach of contract and the fees are not penalty fees.

One could interpret this part of the judgement as a bad indication for the undecided historic terms case, in that it suggests that wherever there is ambiguity in the historic terms about whether or not going overdrawn is a breach of the contract, it will be interpreted that it is NOT a breach and therefore the penalty fees argument will not apply.

One could alternatively argue that some of the historic terms are not ambiguous at all, as they clearly state that "you must not ..."; however that judgement is not for me to make!

[EXC]

Re: OFT WIN

This is Marc Gander's take on where we are.

In my view it contains a considerable number of inaccuracies and wild assumptions.


What has happened with the OFT test case?

Until 24th April 2008, the argument against bank charges was that they were contractual penalties imposed by the bank for customer breaches. These breaches included exceeding overdraft limits or having insufficient money to support a direct debit or a cheque, etc. Where penalties exceed the actual losses suffered by the bank, they are unlawful.

A second basis for challenging bank charges was that they were subject to the Unfair terms in Consumer Contracts Regulations 1999 and therefore they must not be unfair.

Clearly the banks were concerned about both of these arguments as in the two years from January 2006, the Financial Times and the BBC each estimated that the banks had repaid tens of thousands of their customers well over a half a billion pounds in bank charges.


The pressure upon the banks and upon the courts became so great that finally in August 2007 the OFT announced that it would bring a case before the High Court to find out whether the charges were in fact subject to the 1999 regulations.

At the same time the FSA announced that it would suspend the duty of banks to investigate bank charges complaints until the test case had been decided. The Financial Ombudsman also announced that bank charges complaints would be suspended pending the test case. Finally the County Courts received a general advice that they should stay all claims for bank charges. With very few exceptions, the suspension of all cases has been complete.

This suspension of claims was entirely predictable and from a pragmatic point of view, quite understandable. However it has been deeply unfair that the banks were permitted to continue charging and even to raise their charges in some cases.

The OFT test case was heard in February 2008 and the judgment was finally handed down on 24th April 2008.

The judge held that:-

• the banks' 'delinquency' charges were subject to the test of fairness under the UTCCR and so therefore the OFT are free to investigate the charges and to decide a fair level.
• the charges were not penalties at Common Law as we had argued from the beginning of our campaign.
• the bank's current accounts contracts were couch in plain accessible language
• the banks were not providing any kind of service by bouncing cheques, dealing with exceeded overdrafts, direct debits and so forth.

Is that the end of the matter?

No. There are likely to be appeals by the banks on the issue of whether their delinquency charges are really subject to test of unfairness as decided by the High Court.

We expect that the High Court's decision will be confirmed by the Court of Appeal.

It is on that basis that we give the following advice.

Please don't forget that if the Court of Appeal decides differently then there will have to be a reappraisal of the entire situation.

So are my charges still unlawful?

We believe that your bank charges are still unlawful. The reason for this is that the High Court judge ruled that the charges must be fair. We have yet to understand exactly how "fairness" will be measured. However we are extremely confident that the OFT and maybe the courts will decide that the present very high level of charges is unfair.

We all know from the revelations of the CYNthesys costing system used by the Yorkshire and Clydesdale banks that it costs no more than £2.00 to deal with a bounced cheque or bounced direct debit even when the process is conducted entirely manually.

As it is clear that there is scarcely any manual intervention in these matters, we can be certain that the banks never spend more than a few pence (say, .50p) in dealing with each delinquency episode. As all of the banks charge at least £30 per episode ( sometimes as much as £38 ), it is obvious they are making several thousand percent profit. The normal mark-up of any High Street business is about 100%. We do not see any reason why High Street business - including the High Street banks - should be able to enjoy such a privileged level of profit, especially when it is clear from the High Court judgment that delinquency charges are not core business, that it is the poor and vulnerable who will be affected and when those charges are meant to be controlled by law.

We are unable to say at the moment what the correct level of charge should be or what will eventually be decided. However, the OFT capped the credit card companies at a very excessive £12 and it is likely that the banks will be capped similarly. So, yes. Your charges are still unlawful.

Can I claim my bank charges back?

Assuming that the OFT or the courts agree that the current level of charges is unfair, then yes, you can claim them back. The charges will be invalid under the UTCCR and therefore you should be able to recover them in full.

What is the procedure for recovering my unlawful bank charges?

This is not entirely clear at this point in time. What is certain is that the suspension of claims will continue until all of the issues raised by the OFT have been finally settled. This means that it is confirmed that the charges are subject to UTCCR, that the present level of charges is deemed to be unfair and that a new fairer level has been announced by the OFT. At that point, all of the suspensions will be lifted and the claims will be progressed.

Our own informal view is that once the matter of the status of bank charges is finally settled either on appeal or by agreement, that there will have to be put in place some special scheme of repayment.

The numbers are so huge in terms of the numbers of people affected and the amount of money involved, that neither the banks, the courts, the FOS nor the government will want the FOS or the Courts to be besieged with claims for repayment.

What form might an FSA repayment scheme take?

We envisage that the scheme will take the form of payment on demand within a time limit agreed between the FSA and the banks. Given the size of the problem (all created by the banks) the time limit is very likely to be much longer than the current FSA approved 8 weeks for settling customer complaints. It may be as long as 3 months and maybe even 6 months.

There is unlikely to be any provision for the payment of interest on your unlawfully seized charges.

Other possibilities include:-

• The FSA may agree that the banks refund merely the difference between the charges they have seized and the new capped limit.
• The FSA may agree that banks are only required to repay charges going back 6 years - in line with the contractual limitation period under the Limitation Act 1980

Does this mean that I shouldn't bother bringing my claim right now?

Our advice is that you should bring your claim immediately. Don't wait.

This is especially so if you have outstanding bank charges going as far back as about 6 years. It may well be that the banks will try to resist any charges claims beyond 6 years on the basis that they are subject to the 6 year limitation under the Limitation Act 1980.If you start your County Court claim now then you will have laid down your marker and your claim will be heard - even if it takes another year for the suspensions to be lifted.

Alternatively you could choose to make a complaint to the Financial Ombudsman (FOS). This is a cheaper option as there are no court fees. However, it is not at all clear on what basis the Ombudsman might make decisions or whether the FOS might decide to accept a limitation period if this argument was put up by the banks. Very importantly, the FOS is unlikely to award interest on your unlawfully taken charges. The County Court will award you 8% from the day that the charges were seized from you. On the basis that the bank will be obliged to repay you your court fees as well, a County Court claim is likely to be much more profitable.

Suppose I bring a court claim now and later on I find that I have to use an FSA repayment scheme?

If you have started a claim in court, it is unlikely that you will be forced to abandon it and go a different route. Even if you were, the bank would be obliged to pay your court fees as your decision to bring a court claim would not have been unreasonable.

Suppose that my bank offers to repay me straightaway without beginning a formal claim?

The bank has seized your money unlawfully and has had the use of your money for a substantial period of time. They will have lent your money on to other people at a rate of interest as high as 20% and more. Meanwhile you will have suffered the stress and the deprivation.

Of course it is up to you whether or not to accept the money now but we would suggest that you consider refusing any offer the bank agrees to pay you interest at 8%.

If your bank only offers you your actual charges, then begin a Court Claim for the charges plus interest, accept the charges in part payment and continue your claim for the balance of the outstanding interest. We consider that it is highly likely that your bank will choose to settle the whole claim rather than go to court.

Now that it is clear that bank charges have been unlawful what can I do about my credit reputation?

It is clear that anyone who has negative comments or a default entered against their names with the Credit Reference Agencies (CRAs) has a good basis for complaint.

We will be posting advice and templates to assist you with an effective course of action in respect of this.

Please watch out for announcements and also keep an eye on this FAQ document as it is likely to be amended from time to time as the situation changes or becomes clearer.

[scoobydoo]

Re: OFT WIN

I agree

for instance as far as I understood S69 statutory interest can only technically awarded by a court so to encourage chasing that I feel is unwise.

Let alone the rest

[Amethyst]

Re: OFT WIN

the banks were not providing any kind of service by bouncing cheques, dealing with exceeded overdrafts, direct debits and so forth.

- only for unpaid direct debits the judge has stated this as far as I am aware. For paid DD's in exceeded overdraft etc the charge is deemed for a service.


Of course it is up to you whether or not to accept the money now but we would suggest that you consider refusing any offer the bank agrees to pay you interest at 8%.

If your bank only offers you your actual charges, then begin a Court Claim for the charges plus interest, accept the charges in part payment and continue your claim for the balance of the outstanding interest. We consider that it is highly likely that your bank will choose to settle the whole claim rather than go to court.


Like Scooby has said - WHAT!!!!!!!!!!!! S.69 interest isnt applicable before a court claim and to make a claim against a bank for purely the 8% is something CAG have consistently advised against for as long as I can remember. As is accepting charges as part payment. We used to get lots over from MSE fallen at the last because they were continuing settled claims into court based on purely the 8%. He hasnt stated if they should claim this as a reciprocal contractual interest amount or as S.69 though....if contractual then wheres the 8% from except the air and whats the basis on claiming it.

Also wasnt the original announcement in July (small point I know) He hasnt mentioned historical terms, but that may be for keeping it simple to the layman, much as we have tried to do.


Gobblesmackled a bit. Will go through rest later.