SOGAS 1982 & the "It's a service" argument

[fallen404]

I gather the argument we're using is that the charges aren't settled upon when we sign the contracts, so we can use Section 15 of the Supply of goods & services act. The thing is, they are mentioned (at least in NatWests T&Cs they are), meaning this argument probably can't be used. Is there any way of defining what a service is, so as to preclude the banks using this argument?

[thecornflake]

I believe that if the charge is not 'individually negotiated' at the beginning of the contract then it has to be reasonable.

 

I think there is no single legal definition of a service, although I am busy looking for one!

 

There are usually definitions at the beginning of acts, etc that define what kind of service is covered by that particular document so this is what you would need to look at.

 

I did find a general definition of a service but it's very generalised -

 

"an act or performance offered by one party to another. Although the process may be tied to a physical product, the performance is essentially tangible and does not normally result in ownership of any of the factors of production"

Services Marketing, C.Lovelock, S.Vandermerwe, B.Lewis, Prentice Hall Europe, 1996, p6

 

I also found this -

"Economic definition of a service/product: an item delivered to a client, which can be counted and for which a 'recipe' of costs and activities can be defined"

 

Here - http://66.249.93.104/search?q=cache:W7wHwpdOss0J:www-east.elsevier.com/sdinfo/licensing_options/library_costbenefit.pdf+%2B%22Definition+of+a+service%22+%2B%22Law%22&hl=en&gl=uk&ct=clnk&cd=37

 

Shame that isn't the legal definition - for which a 'recipe' of costs and activities can be defined - Fantastic.

 

I did find a legal dictionary that gave this definition -

 

"service n. 1) paid work by another person, either by contract or as an employee. "Personal services" is work that is either unique (such as an artist or actor) or based on a person's particular relationship to employer (such as a butler, nanny, traveling companion or live-in health care giver). 2) the domestic activities of a wife, including the marital relationship (consortium), are legally considered "services" for which a deprived husband may sue a person who has caused injury to his wife. 3) the official delivery of legal documents ("service of process") such as a summons, subpena, complaint, order to show cause (order to appear to show reasons why a judge should not make a particular order), writ (court order), or notice to quit the premises, as well as delivery by mail or in person of documents to opposing attorneys or parties, such as answers, motions, points and authorities, demands and responses."

 

Link here - http://legal-dictionary.thefreedictionary.com/service

[fallen404]

I agree...the "recipe" one would be good, since it necessitates a breakdown of exactly what the banks actually physically do when they refuse a DD or similar.

 

However, the legal definition is "paid work by another person." So, if they can't prove human intervention, they can't claim a service is being provided. You could argue just how much work is involved, too, I suppose.

[thecornflake]

However, the legal definition is "paid work by another person." So, if they can't prove human intervention, they can't claim a service is being provided.

 

I hadn't thought of that. Although I'm sure there are things that are obviously services yet do not involve manual intervention. Withdrawing money from a cash machine? Online services like (I'm getting technical now) Google adwords and XML web services such as Amazon information?

 

However, you still have to find a definition that is acceptable in court. I shall do some more searching when I get a chance.

 

I mentioned in the thread in the Natwest forum fromthe guy who lost that I want to start a discussion specifically aimed at defeating their defence by the way. Keep a lookout for it - When I've organised what I have so far I'll start a new thread.

[fallen404]

Will do. That was my main reason for asking. At the moment, it looks like we'd have to refute their claim that it's a service, given that it's them NOT doing something. Also, most services are useful to the person having them provided to him/her. Refusing DDs is obviously a hindrance, rather than an aid.

[rbrears]

The Act doesnt mention individual negotiations. It refers to the price being provided for by the contract. I will look into this in more detail when I have time.

 

As a first impression it is interesting to note that the OFT in its report on credit card default charges does not give this issue any credence at all. It is mentioned once (see below). In my view it is clear that the OFT does not consider the default charge regime to be the provision of a service. Indeed in its setting out of key principles it immediately talks about breach of contract and continues on this theme throughout all of its legal analysis.

 

Here

 

http://www.oft.gov.uk/NR/rdonlyres/2EBC491E-303E-4FAA-A24D-32EF8396255E/0/oft842.pdf

 

Not only this but later, at paragraph 4.21 it says...

 

"Attempts to structure accounts in order to present events of default spuriously as additional services for which a charge may be made should be viewed as disguised penalties and equally open to challenge...."

 

I think we have a powerful ally in the OFT when it comes to dealing with the "provision of a service" argument.

 

And for good measure (although not on the exact topic of this thread) have a look at this thread too

 

http://www.consumeractiongroup.co.uk/forum/showthread.php?t=6875

[thecornflake]

As a first impression it is interesting to note that the OFT in its report on credit card default charges does not give this issue any credence at all.

 

Thanks for your reply.

 

I would like to point out that Credit Card contracts can be very differently worded than those with bank accounts.

For example, I have a Tariff leaflet with my bank account that just sets out the relevent charges for failed direct debits, etc with no mention of penalty.

 

In contrast, my Egg credit card contract states -

 

"7.1 If you break the terms of this Agreement we may charge you the following, where relevant, to cover the additional cost caused to us:

 

£20 each month you go over the Credit Limit, even if we authorised the Transaction which resulted in you exceeding the Credit Limit;

 

£20 if you do not keep up the payments on the Account;

 

 

£20 for any payment returned or recalled for any reason;

 

any costs and expenses reasonably incurred by us as a result of your breach of this Agreement."

 

This actually shows the reason for the charges being the breach of contract, removing their ability to claim that they are for provision of a service.

 

I'm not saying that the charges are any different, but that the wording of the contracts does mean we have to make more of a case against the bank's defence.

 

However, your following point -

 

"Attempts to structure accounts in order to present events of default spuriously as additional services for which a charge may be made should be viewed as disguised penalties and equally open to challenge...."

 

may prove very useful. I will have to go and read through the OFT report in more detail. It would still have to be proven that the account has been structured in order to disguise the penalties, which arguably would in turn require proof that they are penalty charges in the first place...

 

Forgive me if I'm being a little cynical, for me there is quite a lot of money at stake and the future success of other people.

[rbrears]

It would still have to be proven that the account has been structured in order to disguise the penalties, which arguably would in turn require proof that they are penalty charges in the first place...

 

 

 

I think the point is that the OFT takes the view that if the bank says that the charges are for a service, that doesn't make it so. It says that those charges should be viewed as disguised penalties where they arise in relation to events of default - i.e. the very occurrences that the banks currently charge for and which charges the banks might claim are service charges.

 

I dont think you have to prove they are penalties - the circumstances in which they arise and are applied and the events that trigger them are the key factors - the names they are called are secondary.

 

The fact that the banks T&Cs might be unclear as to how the charges are decribed, or what label is attached to them, or don't actually mention breaking the agreement, will go against them anyway. In any consumer contract not negotiated at arms length any uncertainty as to meaning of clauses will always be interpreted in favour of the consumer. In my view the charges are penalties pure and simple and the OFT agrees.

[thecornflake]

Thinking about there being two points here -

 

1) The charges are penalties and therefore unlawful (as we all know).

 

2) The charges are for a service but deemed by law to be unfair under different legislation.

 

I'm wondering if it's possible to change direction once in court. As we're not sure if the judge will rle in favour of the service argument every time, if you have been arguing that it is not a service and then the judge rules it is, can you then change your claim to it being unfair as service charges or would this end up having to be a separate claim?

[rbrears]

Nothing wrong with having alternative arguments to put to the judge.

[thecornflake]

Nothing wrong with having alternative arguments to put to the judge.

 

Yeah, I'm just wondering if you've put across that they aren't a service charge and the bank says yes they are and the judge rules in their favour, can you then go on to change your claim to the fact that the service charges are unfair?

I thought the judge might deem this to be a separate case.

 

However, you could put both arguments on the claim form initially just to make sure I guess.

[Giveitback]

Yeah, I'm just wondering if you've put across that they aren't a service charge and the bank says yes they are and the judge rules in their favour, can you then go on to change your claim to the fact that the service charges are unfair?

I thought the judge might deem this to be a separate case.

 

However, you could put both arguments on the claim form initially just to make sure I guess.

 

I would put both on the claim. I'm looking into this ATM, and have noticed something that might help Bank Of Scotland customers:

 

"We haven't been able to pay the item(s) shown below because your overdraft limit doesn't cover the amount.

 

To cover our costs, we make a charge of £39 (maximum 3 charges per day) for any item we can't pay."

 

or

 

"We have paid the item(s) shown below even though this means your account is now overdrawn by more than your overdraft limit.

 

To cover our costs, we make a charge of £30 (maximum 3 charges per day) for any item we pay when your account is overdrawn in excess of any agreed limit."

 

Surely this will neatly negate any attempt to claim that they are a proftable service?

[fallen404]

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