Hardship BCOBS 5.1 discussion

[Amethyst]

As 5.1.4 is GUIDANCE only we need to work out exactly what we can do with it. I think I'll ask the FSA somethings about it.

BCOBS 5.1.4 01/11/2009 Principle 6 requires a firm to pay due regard to the interests of its customers and to treat them fairly. In particular, a firm should deal fairly with a banking customer whom it has reason to believe is in financial difficulty.

Raymond Cox's view from http://www.fountaincourt.co.uk/uploa...%20RC%20QC.pdf

is

One particular provision of the BCOBS again
stands out. It is required that a fi rm ‘should
deal fairly with the banking customer
whom it has reason to believe is in fi nancial
diffi culty’ (5.1.5).
The way in which a bank deals with a
customer in fi nancial diffi culty (outside the
Consumer Credit Act 1974) will therefore
be subject to a requirement of fairness,
breach of which may give rise to a claim
by the customer against the bank for
compensation under s150 of the Financial
Services and Markets Act 2000. This
requirement links up with the requirement,
from April 2008, that the OFT has regard
to whether or not an applicant is involved
in ‘irresponsible lending’ when deciding
whether or not to grant a credit licence.
However the latter provision does not
provide a customer with a claim in damages,
unlike BCOBS 5.1.5.
Obvious questions may arise as to, for
example, the time in which payment is
required, the amounts required to be paid
‘The way in which a bank deals with a customer in
fi nancial diffi culty will be subject to a requirement of
fairness, breach of which may give rise to a claim by the
customer against the bank for compensation.’
4 The In-House Lawyer September 2009
BANKING AND FINANCE Fountain Court Chambers
in instalments, the selection of the time at
which to enforce security and the manner in
which the security is enforced. The fairness
obligation in BCOBS 5.1.5 will apply to the
bank’s conduct in such matters. If the bank
has a policy in relation to these issues, it
may be that a great many cases could be
involved, over a period of time.

[natweststaffmember]

Re: Hardship BCOBS 5.1 discussion

I do think a little emphasis might be placed on the targets that collections staff of the banks have, ie they are targetted for income rather than for the account to go back to good working order(shall we say). Not sure it is entirely relevant to this discussion.

[catinahat]

Re: Hardship BCOBS 5.1 discussion

Hi all,
please forgive me if my any of my questions seem a bit 'stupid?' It's a minefield as you know and trying to get my head around the wording of some of the legal guidelines etc and its interpretations... my question really is to do with the wording in BCOBS

quote... ' One particular provision of the BCOBS again
stands out. It is required that a fi rm ‘should
deal fairly with the banking customer
whom it has reason to believe is in fi nancial
diffi culty’ (5.1.5).

My questions with relation to this are

1) Are there definitive rules as to what 'fair' means? ie. Isn't 'fairness' very subjective?
2) Although the ruling went against the OFT, did it actually state anywhere that the banks charges were 'fair'? I'm thinking that the subject of fairness wasn't exactly the issue as such, but more to do with whether the OFT had the power to officiate ... in which case, how does this impact us now with regard to fairness and our pending hardship claims?
3. If there are specific clauses defining fairness with respect to hardship, are these legally binding, or simply a set of recommendations that ultimately, the banks can or cannot choose to adhere to?

As I say, sorry if these questions seem stupid or irrelevant, I'm trying to pre-empt any possible counters the banks may come up with ' forewarned is fore armed...;-) '
Thanks everyone. Catxxx

[Amethyst]

Re: Hardship BCOBS 5.1 discussion

150.
Actions for damages.
— (1) A contravention by an authorised person of a rule is actionable at the suit of a private person who suffers loss as a result of the contravention, subject to the defences and other incidents applying to actions for breach of statutory duty.

(2) If rules so provide, subsection (1) does not apply to contravention of a specified provision of those rules.

(3) In prescribed cases, a contravention of a rule which would be actionable at the suit of a private person is actionable at the suit of a person who is not a private person, subject to the defences and other incidents applying to actions for breach of statutory duty.

(4) In subsections (1) and (3) “rule” does not include—
(a)
listing rules; or

(b)
a rule requiring an authorised person to have or maintain financial resources.


(5) “Private person” has such meaning as may be prescribed.

Ref

One particular provision of the BCOBS again stands out. It is required that a firm ‘should deal fairly with the banking customer whom it has reason to believe is in financial difficulty’ (5.1.5).
The way in which a bank deals with a customer in financial difficulty (outside the Consumer Credit Act 1974) will therefore be subject to a requirement of fairness, breach of which may give rise to a claim by the customer against the bank for compensation under s150 of the Financial Services and Markets Act 2000. This requirement links up with the requirement, from April 2008, that the OFT has regard to whether or not an applicant is involved in ‘irresponsible lending’ when deciding whether or not to grant a credit licence. However the latter provision does not provide a customer with a claim in damages, unlike BCOBS 5.1.5.
Obvious questions may arise as to, for example, the time in which payment is required, the amounts required to be paid in instalments, the selection of the time at which to enforce security and the manner in which the security is enforced. The fairness obligation in BCOBS 5.1.5 will apply to the bank’s conduct in such matters. If the bank has a policy in relation to these issues, it may be that a great many cases could be involved, over a period of time. after which the charges or policies were to be challenged. It would be better for both banks and customers if potential issues were, so far as possible, anticipated and resolved with the approval of the FSA. Fortunately, the FSA has already made clear that there is a role for the approval of industry guidance in relation to regulated activity (FSA Confirmation Of Industry Guidance, September 2007).

Raymond Cox QC October 2009 - Inhouse lawyer

[catinahat]

Re: Hardship BCOBS 5.1 discussion

Hi Ame,

would you let us know what FSA says in response to any questions you put to them with regard to this? Would be interested to learn their take on it..;-) CatXXX