Citifinancial 'Defence' Now Received

[JohnW]

Hi,

Dont know if anyone can help me. But filed a claim recently on MCOL for unfair charges on my Citicard account over last 6 years. Used the spreadsheet to calculate contractual interest from original dates (on statements) of charges using the interest charged by them at this time. Basically it amounts to over £1,600 in charges and interest.

Today have received from the Court their 'defence' statement which was filed by their solicitors, Eversheds which I believe is worded to confuse the issue. For example, they state that 'the Defendant (they) denies that it has unlawfully debited the Claimant's account. The Defendant avers (whatever that means??) that the Particulars of Claim do not particularise the exact amount claimed nor the dates upon which the amount claimed arose and puts the Claimant to strict proof of this'.

(I actually submitted to CitiFinancial an accurate breakdown via a spreadsheet which I sent Recorded Delivery in my LBA. It showed the precise name of the charge, the date as per the statement, the amount, the contractual interest applied from day one and the actual interest rate applicable at time of statement. I could not have made it any clearer? Are they just saying that it is not on the POC (which does not give enough room to record this info anyway). But is my accurate spreadsheet, compiled from data used on the statements not good enough??)

They are also stating that 'the Defendant has agreed to abide by the OFT report and adopt a lower level of default fees which it has set at the new industry standard of £12. Over the lifetime of this account the Claimant has set its default charges at £25.'

(I have checked the schedule/spreadsheet I sent to CitiCards and note that I have submitted charges of £25 from Nov 02 as per their statements!! Right until 4 Aug 06 when they finally reduced them to £12 and from that point onwards I have listed the charge as such!!! So what the heck are they on about???)

It then goes to to say 'the Defendant will make an ex gratia refund to the Claimant of £325 which is the difference between (i) the current default fee of £12 and (ii) the amount at which default fees claimed were charged to the Claimant.'

(So surely they are admitting that they are unfair charges??)

To be honest, I am not sure if or should I post the whole text of the 'Defence' for your comments? And if so, am not sure how to do this? Is there anyone who would be interested in reading through it and offering advise.

Enron, if you are reading this, you PMd me recently to advise on AQ matters, however the court doc I received today is simply transferring the listing from Northampton to my local County Court and states 'the filing of an allocation questionnaire be dispensed with in this case unless the District Judge at the court of transfer orders otherwise.'

 

Would be much appreciative of any help and advise and explanation of what/where and how to post to an appropriate posting.

 

Thanks!

[Mistermind]

"avers" = "states"

 

Card employees are under orders to try it on, to test the stamina and confidence of claimants. Those who are baffled, sidetracked and wearied by this process of attrition will settle for less, which is what Citifinancial is aiming for. It is not about the principle, it is about the money.

 

The fact that they have submitted a written defence is not to say they will appear in court when it comes to the crunch. They want you to think they will defend, so as to test your resolution, whether you will remain standing toe to toe, eyeball to eyeball and not blink. I am familiar with Egg Card (owned by Citigroup) who no longer indulge in this kind of time-wasting, but not familiar with Citifinancial Card behaviour. You will no doubt discover their recent form on settlement of reclaims, by reading up on other threads in the forum for that particular card, not in this General Forum.

 

Contractual Interest - reclaim of this was dismissed in the High Court last year. Unless you have a super barrister burning the midnight oil and ready to attend court for you, best never again to mention the phrase "contractual interest". You only want refund of debit interest levied by Citi card accruing from unlawful charges. If they refund on charges without admitting liability, then stands to reason they have no grounds for hanging onto interest accrued on aforesaid charges. That interest is reclaimable because it was "demonstrably" levied on the statement. But you need to be sure that interest is not accrued on legit purchases, i.e. if the total backlog of unlawful charges was £1600, but in March 2008 the monthly balance was only £500, then the "demonstrable interest" visibly levied on the March 2008 statement would be partly due to unlawful charges, and partly due to new purchases. I.E. part of the £1600 charges, although allegedly unlawful, has already been paid by yourself (if current card balance is much below £1600), and for this reason did not attract debit interest.

 

If you wish to claim "Contractual Interest" in excess of the interest physically showing on your card statements then that is a different ballgame on which I cannot advise. If Citi did show up in court then you will need to have done very very thorough reading and preparation. For example, search for a CI Defeated thread started by "Dad" in 2007.

[nicklea]

For interest search for "Sempra"

 

With reference to the OFT report take this along:-

 

The OFT Report “Calculating Fair Default Charges in Credit Card Contracts”

1. This section is pleaded in case the Claimant should try and defend it’s charges by reference to the OFT Report of April 2006 “Calculating Fair Default Charges in Credit Card Contracts” (“the OFT Report”).

2. The OFT Report did not state or give guidance that a level of £12 was fair; neither did it recommend this figure in any way, it was merely a statement of regulatory intent.

3. The OFT Report set a threshold level of £12, below which it would not warrant regulatory intervention at this time (para 5.4). The reason given for this was that their resources would be better directed at cases involving more serious economic detriment.

4. The OFT Report specifically stated that the OFT had no power to constrain private civil actions or to determine what a court should decide (para 5.7) and that a court will certainly not consider that a default fee is fair just because it is below the threshold (para 5.5).

5. The following extracts from the OFT Report demonstrate the points pleaded above:-

As a practical measure, to help encourage a swift change in market practice, we are setting a simple monetary threshold for intervention by us on default charges. The threshold is £12. (paragraph 5.3, emphasis mine)

We regard the setting of the threshold as a provisional practical measure to move the market towards compliance. We should make it quite clear that we are not inviting the banks to align their charges at such a threshold figure. We are not proposing that default fees should be equivalent to the threshold, and a court will certainly not consider that a default fee is fair just because it is below the threshold. (paragraph 5.5, emphasis mine)

 

The threshold is not intended to be a permanent feature of our intervention in this market. We will consider further action if trends in the market suggest that this threshold approach is insufficient to bring about appropriate and early change in the market. (paragraph 5.6, emphasis mine)

 

It is also important to note that the threshold for action is a statement of our regulatory intent. We have no power to constrain private civil actions or to determine what a court should decide and other enforcers may apply for injunctions under the UTCCRs. (paragraph 5.7, emphasis mine)

 

 

hope this is helpful

[gizmo111]

I'll move this to the Citi forum where it will be seen by lots of others people claiming from them. Citi are unique in their tactics.

 

Good Luck

[JohnW]

Thanks to you all for advice. As regards the 'contractual interest' I have already sent them a spreadsheet with this on the LBA and also stated it in the court application MCOL, so I guess it is too late to simply 'drop it' or 'avoid the mentioning of contractual interest' again?? So maybe I am stuffed??

Citicards (or rather Eversheds) actually state in their defence letter that 'the Defendant will make an ex gratia refund to the Claimant of £xxx which is the difference between (i) the current default fee of £12 and (ii) the amount at which default fees claimed were charged to the Claimant.' The offer of an ex-gratia payment is about a third of the actual claim (although claim includes the contractual interest portion). If they send this payment, as it is ex-gratia does that enable me to keep it and pursue the rest, as it is my understanding that an ex-gratia payment is not actually full and final settlement?

Also, today I have coincidentally received the following letter from the Office of the Chief Executive and CitiCards:

 

Re: Request for repayment of charges - Account Number .............

 

Thank you for taking the time to write to me about the charges, which have been added to your Citicard account.

On Wednesday 5th April 2006 the Office of Fair Trading (OFT) issued a statement regarding the default charges levied on customers by credit card issuers for breaches of contract such as making a late payment or going over their credit limit.

Within that statement the OFT has stated that it believed that those charges are too high and recommended credit card companies reviewed their position with a view to reducing their respective charges to a miaximum of £12, unless there are exceptional reasons why a higher level should apply.

Although not a party to the OFT investigation that led to its report, Citicards were aware of the report and we reconsidered our charges in light of the OFT statement.

From 28 June 2006 onwards we lowered our charges to the OFT recommended rate of £12. THIS CHARGE IS NOT RETROSPECTIVE IN EFFECT.

Citicards does not believe that the Terms and Conditions of the Agreement are in any way unlawful or unfair. Citicards recognises that customers sometimes exceed their Credit Limits and/or fail to make a payment and has systems and processes in place to deal with this. These include the use of computer systems, staff and other necessary costs. The charges set out in condition 12 of the Agreement are calculated by taking into account the costs incurred by Citi in maintaining these systems and processes. These charges therefore represent a genuine pre-estimate of the loss caused to Citi by customers who break the terms of their Agreement.

We have successfully argued the fairness of the above polilcy and the fairness of the £12 charges in court, with the result that claims have been dismissed, and the courts have implicity held that the policy is fair and the charges reasonable, being in line with both the OFT guidance and common law principles of damage for breach of contract.

I understand that this was not the outcome you would have hoped for and if you would like an independent review of this, you may refer to the Finance and Leasing Association at the following address:

 

The Compliance Manager

4th Floor Imperial House

15-19 Kingsway

London

WC2b 6UN

 

You may also contact the Financial Ombudsman Service. This must be done within six months from the date of this letter. I have enclosed their leaflet for you.

 

(End of letter)....

 

Here also is the text of their defence letter.............

 

CITIFINANCIAL EUROPE PLC

DEFENCE

1. The Defendant is a credit card company whose registered office is at 87 Castle Street, Reading, RG1 7DX

2. The Defendant admits that the Claimant had a credit card account (the Agreement) with the Defendant at all material times during the relevant period.

3. The Defendant avers that the Agreement with the Claimant contains terms entitling the Defendant to levy default fees and avers that the Claimant was aware of and agreed to the same as before entering into the agreement.

4. The Defendant denies that the same are:

4.1 a disproportionate penalty and unenforceable or irrecoverable as penalty charges at common law and/or

4.2 invalid under section 4 of the Unfair Contract terms Act 1977 and/or

4.3 para 8 and sch 2((1)e) of the Unfair Terms in Consumer Contracts Regulations 1999; and/or

4.4 unreasonable under section 15 of the Supply of Good and Services Act 1982 and/or

4.5 that the cases of Dunlop Pneumatic v New Garage (1915) AC 79 and Murray v Leisureplay (2005) ECWA GV 943 are persuasive precedents, and puts the Claimant to proof of this by specific reference to the case law relied upon and/or the exact citation of the relevant parts of the sections of laws and regulations relied upon.

5. The Defendant denies that it has unlawfully debited the Claimant’s account. The Defendant avers that the Particulars of Claim do not particularise the exact amount claimed nor the dates upon which the amount claimed arose and puts the Claimant to strict proof of this.

6. The Defendant avers that between xxxxx and xxxxx, the Claimant breached the Agreement on no fewer than xxx occasions, entitling the Defendant to debit £xxxx to the Claimant’s account by way of default fees, as per the Terms and Conditions of the Agreement.

7. The Claimant is claiming as a money claim a sum equivalent to that which he claims was unlawfully debited to his account over the term of the Agreement in late payment and over limit fees. This claim is entirely based on the recent OFT statement on the alleged unfairness of such default fees. The OFT stated that the level at which default charges, though not the principle of default charging itself, was unfair in the context of the Unfair Terms in Consumer Contracts Regulations 1999. It also reported that the charges were, in its opinion, a penalty contrary to common law principles of damages for breach of contract.

8. The Defendant has agreed to abide by the OFT report and adopt a lower level of default fees which it has set at the new industry standard of £12. Over the lifetime of this account the Claimant has set its default charges at £25.

9. The Defendant will make an ex gratia refund to the Claimant of £xxxx which is the difference between (I) the current default fee of £12 and (ii) the amount at which default fees claimed were charged to the Claimant.

10. The Defendant avers that the Claimant’s claim is not a money claim but a damages action and further avers that the Claimant’s interest calculation is not applicable to this action or, if it is applicable, that it is wrong and the Defendant puts the Claimant to proof that this interest is owed. Specifically, as the Defendant is a credit institution and not a deposit taker, it cannot set off default fees against money held on account. As such, it cannot be held liable for interest on a notionally paid debt rather than an actual one. It is averred by the Defendant that it is only from the time of any such payment that interest could have accrued on such payment as if it were a debt.

11. Save as otherwise admitted, the Claimant’s Particulars of Claim are denied and each and every allegation in the Particulars of Claim is specifically denied.

(End of Citi defence letter..........................)

 

 

I am now waiting for confirmation from my local Court (as it has been transferred out of Northampton (MCOL) even though I did not request it (not complaining!) as to when the claim will be listed. I am not sure if they will request an Allocation Questionnaire, it is down to my local Court.

 

I am obviously concerned about the fact that I have asked for contractual interest and this could potentially put me at risk? As they will argue this in Court and no doubt the Magistrates will agree?

 

Can anyone please give me arguments that I am able to use against them. For instance, I have still not had any 'manual intervention' sheets sent to me (despite asking for them) nor have they written to confirm that 'none exist'. So I guess that all my charges/fees were automated with no manual/human cost involved? There true costs must be minimal in this, and nowhere near the purported £12 (or slightly over as they suggest).

Cheers again.

[Mistermind]

Citifinancial claim of having won in court recently is sensational news, and has also been posted by another poster today. Unless anyone has chapter and verse or a posting re such alleged landmark ruling it will have to be taken with a large grain of salt.

 

Around last June Lloyds faced a claim for refund of bank charges and interest. Lloyds paid the charges portion ahead of court, but their barrister attended Small Claims and successfully got the interest part dismissed. Lloyd probably avoided battle on charges because they could not afford dirty linen re charges computation washed in open court. Citifinancial faces the same dilemma as Lloyds. They know from precedent rulings that they have a very good chance of winning against contractual interest, but they and other fellow card institutions would not like an adverse court ruling on charges refund. The most likely outcome is that at the last minute Citi will pay up on charges but defend in court against CI to make an example of you. If so you might consider what is the better part of valour.

 

If Citi turn up in court to defend against both parts, it will likely end up a 1-1 score draw. The danger could be that the Citi barrister out-talks you in court, and the Small Claims judge outraged by a claimant omitting to do homework on a binding High Court precedent judgment, treats both parts as one bundle and dismisses both, score 0-2.

 

It is not known what proportion of your claim is CI, vis-a-vis Citi's settlement offer. I am not familiar with the recent form in Citifinancial battles as that forum is not my local. Citi's claim of a recent victory does need to be hunted to ground. As they made this claim in black and white, no reason why you cannot with full justification ask bluntly for the date and court for this alleged famous victory. That is what advance disclosure of the defence plea is for -- to enable the claimant to prepare his response.

 

As for ex gratia payment, if you do accept they will for sure add the condition of full and final satisfaction. You know the pros and cons for fighting on or settling. If you write back knowledgeably and confidently Citi may also up their settlement offer in this war of nerves. There is also the option of amending your claim dropping CI claim at a stroke removing your weak point, but CAG lawyers will be better placed to advise on that.

[Enron]

When you get the Allocation Questionnaire get in touch with me.

 

I've got conflicting cost exhibits based of the same years figures, which should cast enough doubt onto their figures to get the draft order adopted.

 

Additionally, through my manual intervention sheets it can be proved that events such as "late payment" charges are entirely automated. Thus costing them a matter of pence per default of contract, and not the £12.88, £13.47 or £27+ they have stated.

 

Been through the process start to finish with these people so know all their weak points.