The OFT Case

[Fred_Funk]

A while back, I ahd all this clear it my head but the longer it drags on and the more I read about the test case, the more confused I get.

 

I was hoping for some clarity from this piece...

 

Q&A: Bank charges | Money | guardian.co.uk

 

... on the Guardian website. But it's actually left me even more bewildered.

 

How much can I get back?

 

This will depend on the final outcome of the case. However, claims can only go back six years. The OFT's report into credit card charges resulted in default fees being cut to a maximum of £12. If the same level of charging is decided on in this case, many consumers could be entitled to reclaim at least half of what they have paid. This will be less than had they made an uncontested claim before the case went to court. Customers who did that got back all their money.

 

I understood it wasn't quite that simple – either the charges are lawful or they’re not. The OFT may well suggest £12 represents a reasonable reflection of the bank’s costs but if the charges are deemed unlawful then, regardless of this (and what the banks may like you to believe), historic charges will be reclaimable in their entirety.

 

Is that not the case?!

 

Fred_Funk

[african_igbo]

Same here I was on top of my game last July 2007..

[brown1950]

Just thought you would like to know who is actually hearing this latest hearing :-

 

The appeal is before 3 judges headed by none other than The Master Of The Rolls, Lord Justice Clarke (Sir Anthony Clarke) who is regarded as second in judicial importance to the Lord Chief Justice.

 

 

Master of the Rolls

Sir Anthony Clarke

Born 13 May 1943; Called to the Bar (Middle Temple) 1965; a Recorder 1985-92; QC 1979; High Court Judge (Queen's Bench Division) 1993-98; Admiralty Judge 1993-98; Lord Justice of Appeal 1998-2005; Master of the Rolls and Head of Civil Justice 2005-.

 

 

 

 

 

Vice-President of the Court of Appeal (Civil Division)

Lord Justice Waller (Sir Mark Waller)

 

Born 13 October 1940; Called to the Bar (Gray's Inn) 1964; QC 1979; a Recorder 1986-9; High Court Judge (Queen's Bench Division) 1989-96; Presiding Judge, North Eastern Circuit 1992-95; Lord Justice of Appeal 1996- ; Chairman, Judicial Studies Board 1999-2003; President, Council of Inns of Court and the Bar, 2003- . Vice-President, Court of Appeal, Civil Division 2006- .

 

 

 

Lord Justice Lloyd (Sir Timothy Lloyd)

 

Born 30 November 1946; Called to the Bar (Middle Temple) 1970; QC 1986; Attorney-General to The Duchy of Lancaster 1993 - 1996; High Court Judge (Chancery Division) 1996 - 2005; Vice-Chancellor of the County Palatine of Lancaster 2002 - 2005; Lord Justice of Appeal 2005 - .

__________________

[african_igbo]

ummh look like bankers to me..

[Aequitas]

I'm increasingly thinking this test case is one big farce.

 

The consumer was misled into believing that he had a watertight case against the banks. The case was simple, but flawed:

 

1. Bank charges are outrageous

 

2. They must therefore be unlawful

 

A very similar argument to:

 

1. The price of food and drink in airports is outrageous

 

2. It must therefore be unlawful

 

Now that the law is not proving as straighforward as the consumer had been led to believe, instead of accepting that the legal case never was clear cut in his favour, he is crying foul. If all this ends in tears for the consumer, as I fear it may, consumer groups will have much to answer for for having raised unrealistic expectations on dubious grounds.

 

The judges who have been staying cases have really shown what side they are on (the filthy banks) and are a disgrace to the concept of justice, allowing the banks to stall for years...

 

The flood of cases brought against the banks is unprecedented. It is important that the courts make the right decision. At the moment they cannot do this since the law, previously thought to be certain, has been thrown into confusion. Do you want justice or not? If a county court judge makes a decision tomorrow on the basis that the law is x when it turns out to be y then justice has not been done. It will be res judicata and neither the consumer nor your bank, according to who loses, can go back and unravel it. The delay, whilst causing hardship to some, is entirely justified.

 

...and try to wriggle out of paying up when the Regulations clearly intended the charges to be unlawful

 

If the Regulations were so clear on the point the matter would not need to have been litigated.

[Bigmac versus]

Aequitas I disagree with most of the above and think your views are somewhat distorted.

 

Consumer groups have helped many thousands of people through difficult circumstances to get their lifes back in order and will help many thousands more in the future.

 

You are of the opinion that consumers have been misled on dubious grouds. Are you for real?

 

Remember the banks didn't take their fight to court to prove their case despite having many thousands of opportunities to do so, they were TAKEN to court for this test case.

 

I make no assumptions how the result will go but I do have a personnal view on the timing of this test case and the impending result but regardless how this goes the consumer groups deserve all the credit they get for without them many people would be in a weaker position.

 

You sound to me like your jealous and would love the case to go the banks way. Is that because you will not benefit from the consumers having their day?

 

Regarding the delay which you feel is justified.. I cant answer that without being cagbotted.

[Aequitas]

Consumer groups have helped many thousands of people through difficult circumstances to get their lifes back in order and will help many thousands more in the future.

 

That I do not doubt. On the whole they do an excellent job. I hope I have made my own small contribution in the landlord and tenant forum on this site as well as elsewhere - at the last calculation some 6000 posts. The consumer movement has had a tremendous effect on the way the consumer is treated. Sometimes, however, it gets it wrong. Sometimes changes have unforeseen effects. The very problem of bank charges may in some measure be attributed to consumer groups who, 30 odd years ago, demanded and got free-if-in-credit banking. It looks like the wheel will go full circle. Another example is fixed fees for conveyancing. They went and standards have dropped. There is a move for them to be reintroduced!

 

You are of the opinion that consumers have been misled on dubious grouds. Are you for real?

 

I am really for real! I have explained elsewhere and at length why I think the legal arguments offered were dubious and will not go over them again.

 

Remember the banks didn't take their fight to court to prove their case despite having many thousands of opportunities to do so, they were TAKEN to court for this test case.

 

This is entirely immaterial to the legal arguments. I have no idea why the banks did not take up the fight in the lower courts; perhaps it was simply an inabilty to cope with the sheer number of cases. As I understood it the banks agreed to the test case (although it is not strictly that).

 

I make no assumptions how the result will go but I do have a personnal view on the timing of this test case and the impending result but regardless how this goes the consumer groups deserve all the credit they get for without them many people would be in a weaker position.

 

I likewise make no assumptions. The problem has been misguided over-enthusiasm arising out of a justifiable cause.

 

You sound to me like your jealous and would love the case to go the banks way. Is that because you will not benefit from the consumers having their day?

 

Jealous of what? I would love this to go the consumer's way. I have repeatedly said that the level of bank charges cannot be justified, but because they cannot be justified does not make them unlawful. Banks are only interested in shovelling more cash into the gaping maw of their insatiable greed - they are not alone in that. A lot goes on that is unjustified, but, for better or worse, we live in a socio-economic climate that, whilst it imposes some measure of control on business, does not like to interfere with markets.

 

Where I feel the consumer movement has gone wrong on this issue is to concentrate on the individual contract aspects. What they should have concentrated on is the competition law aspects.

 

Regarding the delay which you feel is justified.. I cant answer that without being cagbotted.

 

My position is quite simple. I am a lawyer. I believe in justice within the law. (I also believe in justice, but that is not the same thing.) Both the banks and consumers are entitled to justice within the law. That has to be fundamental. This issue will be decided according to the law. As a lawyer I tell people what I think the law is. That may involve attacking sacred cows. I may be wrong, but I will not alter my opinion to suit prevailing fashion.

Edited October 31, 2008 by Aequitas

[Bigmac versus]

Maybe I read your post wrong Aequitas but the case as I see it is one which the banks WILL lose, the charges are subject to fairness and as such they will have to pay the money taken back, the banks know it which is what gets me. Their appeal(s) are solely aimed at slowing the whole process down. Shame on them all.

[Aequitas]

Surely they are appealing because they do not like the result.

 

When you say "the charges are subject to fairness" what do you mean?

[Aequitas]

Can some kind person give me the URL for the judgment, please?

[Bookworm]

1st one:

Office of Fair Trading v Abbey National Plc & 7 Ors [2008] EWHC 875 (Comm) (24 April 2008)

 

Historic terms:

 

http://www.oft.gov.uk/shared_oft/personal-current-accounts/Bank-charge-judgement2.pdf

Edited November 1, 2008 by Bookworm

[Aequitas]

Thank you!

[determindator]

The Banks did not refunds millions of pounds in charges prior to all this stalling, because they were having a 'good hair day' it was because they didn't want to disclose the profits made by bank charges and what the true cost is. That tells me they're extortionate, unfair etc etc. They've already set their own presidence by refunding charges. Now they need to do the right thing, that's my interpretation on the fundamentals of law.

 

Keep the faith:-D

[Aequitas]

If the banks had won the UTCCR point and the OFT appealed, would the OFT be stalling?

[Bigmac versus]

Why would the OFT stall? Ask yourself who has anything to gain by stalling and you will find the answer your looking for.

 

No the banks would still be stalling, dont you get it, maybe you should read up on other peoples cases and see how the banks have consistently dragged their heels and avoided difficult questions by paying up.

[Bigmac versus]

So being a lawyer what is your view?

 

Surprise me.

[Aequitas]

The banks and the OFT agreed to go to court to see how the UTCCR impacted on bank charges. The banks did not like the court's decision. The banks have appealed. This is their right just as it is for any other litigant. It is not the banks' fault that the wheels of justice turn slowly.

 

There seems to be a suggestion that the banks should not appeal because it is blindingly obvious that the UTCCR apply in the way people want them to apply. Let's not forget that not that long ago it was virtually an article of faith for most contributors to this forum that it was blindingly obvious that bank charges were contractual penalties.

 

Most consumer campaigns are either to change the law or to make sure the law is complied with. The fundamental flaw in this campaign has been that (a) in so far as it was based on asserting that bank charges were contractual penalties it was based on a misunderstanding of the law and (b) in so far as it was based on the UTCCR it was difficult to see how precisely they applied.

 

In any event, the first decision did not say that bank charges were unfair, just that they were subject to assessment as to whether they were unfair. If the first decision is upheld, the assessment still has to be made. I quote from the very last paragraph of the first decision (my italics):

I reject the Banks' contention that the Relevant Terms are exempt from assessment as to fairness under Regulation 6(2) of the 1999 Regulations (paragraph 421 above). This does not mean that the Relevant Terms are necessarily to be regarded as unfair under Regulation 5(1) or that they are not binding upon consumers under Regulation 8(1): those are not questions for me to decide in this judgment. For the reasons that I have explained, I decline to make any declaration as to the meaning and effect of the requirement of good faith in Regulation 5(1) of the 1999 Regulations (paragraph 448 above).

[brown1950]

In the hearing of the appeals today Milligan was continuing on from last Thursday. His main points seemed to be that he thought the OFT was questioning the level of the price, not the banks right to charge at all, and that the OFT therefore agree the banks have the right to charge and are simply questioning the level.

 

He used a Steering Wheel analogy (bizarre) and said if you are selling a steering wheel for £10k and add a leather cover do you not have the right to charge another £10k for the cover (Doesn't seem to fit at all in my opinion and they are picking some very weird analogies).

 

(thought we were all fully aware of this point to be honest so not really understanding where this line is going, but they have gone back in now so we shall see)

 

The OFT's Mr Crow spoke for a bit and agreed that the case is all about the level of the prices - and that people were complaining the prices were just too high. Clarke agreed with him that the case was primarily about the level of the charges.

 

According to banana 's EXC who is reporting back to us from the Courtroom, Crow is doing a blinding job for the OFTs case and is holding his own.

[brown1950]

Couple additional bits from this morning - Malik for Abbey is saying Abbey will not making a submission at the moment.

 

Jonathon Crow for the OFT said no assessment on fairness of charges has been reached - and talked about the whole reason they are in court - in normal course of events the OFT duty bound to consult with industry and if cant reach decision they take enforcement actions - in this case half way through the investigation the banks said no investigation was needed and they wouldnt participate as they disputed the relevance of the UTCCR and that's why they have bought the test case.

 

OFT now accept that paid item fees are part of a service as per Smiths judgement. Judges had a chat in break and started the afternoon by asking the possible consequences of the OFT winning and ruling the charges as unfair.

 

Crow said as per regulation 8 UTCCR that the unfair terms would not then be binding on the consumer. Crow also said in respect of the backbook of consequences (historical charges) the OFT are only looking forward as it not in OFT remit to deal with recompense etc.

 

Then Crow highlighted the OFT skelton argument which basically covered the inflexibility of standards terms of contracts - generally a consumer doesnt read contract - if he does he doesnt understand it , if he does theres nothing he can do about it - and if theres nothing he goes to another bank and same applies - and this analysis is reflected in directive to utccr regulations he described the ' free if in credit model as a low cost harsh term contract'

 

Crow spoke regarding Rabinowitz's points made last Thursday about the EU driectives (internal markets and protection of consumers) Crow said he read it as not two purposes but as a single purpose and the consumer protection element of the regualtion is the tool that promotes effective internal markets. Legaslative basis for directive is a high level of consumer protection.

 

Jonathon Crow described the banks interpretation of how the banks interpeted the judgement as 'venomous'

 

Crow spent lot of time veering off topic into reasons we're in court because charges are too high and too much consumer detriment.

All banks now given own individual judgement in terms of whether utccr apply, Crow replying, next banks going through individual terms and judgement on PIL appllication to appeal on last day.

[enaid]

Well a "Big Thanks" to Brown1950 I think is in order, for relaying this info straight to us. I'm sure there will be much more to come, so watch this space folks Enaid x

[brown1950]

It is a little worrying the focus at the moment seems to be on the reasons for the test case and the consquences for the banks.

Once the OFT have deemed the terms unfair (if it is carried over that the UTCCR applies) then the OFT will not do anything about past charges (ie its not in its power to order refunds) and this is where a second test case will come in, which will decide on the elements of refunds and if charges can be refunded as the terms are unbinding on the consumer. So long long way to go.

[Michael Browne]

Posted on LB by Amethyst

 

15.34

 

This bit where Crow describes the PCA free if in credit model as a ''low cost harsh term contract''. is quite good i think. The terms of the contracts we have been arguing are non-individually-negotiable which is contrary to the UTCCR and thus makes them invalid. The banks have said the terms are individually negotiable, and in essence they may well be, however as Crow has explained consumers don't tend to read them, if they do they can't practically negotiate individual terms on them, and the only choice is to not open the account and to go to another bank, which has pretty much exactly the same terms. I think it will be interesting to hear the banks response to that, and the Judges views.

 

 

 

Posted on LB by EXC

15.46

 

Milligan for Barclays responded to Lord Justice Waller's ''Peter pays for Paul'' interpretation of the 'free if in credit' lbanking model last week by saying that the fact that the banks can contractually charge one account holder £100 and another £1000 for their banking is irrelevant as the contracts are identical. Rather missing Waller's point.

[Aequitas]

The terms of the contracts we have been arguing are non-individually-negotiable which is contrary to the UTCCR and thus makes them invalid.

 

It is not contrary to the UTCCR for term not to be individually negotiated, but for a non-individually negotiated term to be unfair.

 

The banks have said the terms are individually negotiable, and in essence they may well be, however as Crow has explained consumers don't tend to read them, if they do they can't practically negotiate individual terms on them, and the only choice is to not open the account and to go to another bank, which has pretty much exactly the same terms.

 

I think that that goes to the heart of the matter. Even if the terms are not deemed to be individually negotiated it does not follow that they are unfair. Taking the terms of each contract individually I have difficulty finding them in conflict with the UTCCR. The point is though that the customer has no real alternative because if he goes elsewhere he will be faced with similar terms - but that is a competition law argument that the UTCCR are not intended to deal with.

[Michael Browne]

18.33.Posted on LB by EXC

 

To elaborate on the argument that the Barclays QC, Milligan, spent a long time putting forward, was his contention that the OFT have never argued that UTCCR excludes the banks the right to charge for any aspect arising from a request for an unauthorised overdraft. And as such the OFT must have an issue with the amount charged, which the banks would argue is a matter of commercial choice. The OFT have recently confirmed that they believe it is not unreasonable for the banks to make some kind of charge.

 

Milligan referred to a question he put to the OFT's Brian Doctor in the initial case when he repeatedly asked that if the relevant charges were 1p, would the OFT be taking issue with them? And that Doctor never answered the question.

 

This issue pertains to the part of the regulations that exempts the assessment for fairness of the 'adequacy' of the price for the services supplied - basically the level of the charge.

 

Milligan used the example of buying a car for £10,000 and then purchasing an add on extra of a leather covered steering wheel for a further £10,000 (I know the figures are not realistic but that's what he used). But the problem I see with this analogy is that the steering wheel cover is ancillary part of the overall bargin and doesn't form the main part of the contract. The regulations exempt from the assessment of fairness any aspect that forms the main or essential part of the contract.

[Aequitas]

I think the point is this. Either a charge is fair or unfair. The simple fact that it may be considered too high does not on its own make it unfair. The judge ruled that simply because there can be no assessment that the charge is too high does not stop there being an assessment of whether or not the charge is fair.

 

To give an example:

 

You want to do a one off transaction with a bank, say, transfer funds abroad. They tell you the fee will be £50. You instruct the bank to do the transfer. You cannot claim back the £50. Regulation 6 (2) applies. However, the contract with the bank says that if they find a mistake in the request form that you must pay them a further sum of £50. This would be unfair as it is a term "requiring any consumer who fails to fulfil his obligation to pay a disproportionately high sum in compensation."