What if bouncing your direct debit etc is really a service?

[BankFodder]

One correspondent on the Bank Charges Hell site has suggested that some banks may try to claim that by returning your direct debit or cheque or else by allowing an overdraft to be exceeded they are in fact providing a service.

The idea here is that in a tacit acknowledgement that their penalty charges are unenforceable, the banks are now reverting to "Plan B" and claiming that as they are "providing a service", they are free to charge what they want as they are providing some extra value.

 

from BankChargesHell.co.uk:-

If the court finds that it is the provision of a service then the law on penalty charges does not apply (market forces determine the fees that can be charged for the provision of services).

 

I agree that if a court accepted that the bank was providing a service that the question of penalty charges would no longer become an issue.

 

However, I disagree that this would cause a problem for the customer seeking to recover charges in court.

 

The Supply of Goods and Services Act 1982 - (s.15 ) which is linked through:- http://www.invictadigital.com/bank/phpBB2/viewtopic.php?t=46

... makes it clear that where the price of a service is not fixed at the time the contract is made, a reasonable price will be implied.

 

What is reasonable has to be inferred from the facts but if it is correct that the cost of the banks "service" is only a few pence - maybe a pound, then surely a mark-up of many hundreds of percent will be excessive and certainly not reasonable. Most High Street businesses mark-up about 100% (books - much less). There seems to me no reason why the banks should reserve to themselves the right to exceed this established practice.

 

****************************************

 

The equivalent provision exists in the Sale of Goods Act 1979 - also linked in the Library. (s.8 ) and I would venture to suggest that this presents an excellent alternative argument to the DPA solution which is currently being used to counter the bank's excessive charges for bank statements.

 

 

I have never seen anyone anywhere discuss the use of these two provision in respect of the banks or their penalty charges.

 

I belive that there was one case - whose name escapes me - where the bank did actually win in court on the basis of the "service argument". However, the argument which I have proposed above was not used by the lawyer handing the case and I don't know why not but I would welcome it very much if someone would come to this thread and "put me right".

[Guest]

My attack on this would be that they maintain the account on behalf of the customer, and if the customer had not wanted the payment to be made he would not have written the cheque or authorised the SO/DD.

 

The bank has a choice whenever it comes to paying out a transaction which would breach an overdraft limit. It can choose to pay the amount, and pursue costs to its customer, which could be justified in court as the amount had actually been paid (under these circumstances they would be eligible to recover the amount AND liquidated damages, and possibly to even try this defence as they HAD actually obeyed the instruction of the customer). But where it chooses NOT to pay the amount, it can't be offering a service of any description, because it's actually going against the wishes of the customer - and if it's going against the instructions/wishes of the customer, that can't be called giving the customer a service.

 

They can't have it both ways. That's how I see it.

[BankFodder]

I don't think that they do want it both ways.

[Russe11]

If the defendant claims these charges to be a provision of service, the claimant will contend on the basis that contract states the charge to be a result of a breech of the defendants terms and conditions.

 

 

I intend on putting this in my particulars of claims in all future claims, I think that has cleared that up.

 

Please correct me if I have made a mistake

[Russe11]

or should be saving this until they submit there defence

[BankFodder]

I think that you would need to understand a little more what the srvice is and under what clause in the contract they purport to offer the service.

You might need to discover this information by means of a request for better particulars of defence. This is a reasonable and useful response to a defence but no one ever talks about it very much and it is not often done in the County Court - I don't know why not.

Wait until you receive a defence. Post it and we can decide how best to proceed.

[Russe11]

or maybe

 

 

. If the defendant claims the charges are not penalty charges, but claims the charges are a provision of service, the claimant will contend the charges are not a provision of service on the basis that the contract states the charges to be a result of a breech of the terms and conditions, no reference is made in the terms and conditions to a charge for a provision of service.

 

 

well you get the idea

[Russe11]

many thanks bank fodder, but the fact they have already won on the grounds of provision of service concerned me, will just have to get my arguement against this prepared.

[Russe11]

this copied from my banks T&Cs

 

6. Bank charges

 

6.1 When you open your account, we will give you the relevant

price list, which includes the prices of our services that are

used most often. You can also find out about these charges

by telephoning us or by looking on our website, or by

asking our staff.

 

Hang on a moment, the second sentance is implying that it refers to the first statment.

 

Is this the case that charges are on the price list

or

the price list is for services

or

they want to call charges services, but they can't

or

ask the staff and they will tell you about the charges, but when you contest them they are not charging but providing a service.

 

 

however no mention of any bounced cheques or overdrafts

 

then in the next section

 

7.11 Unauthorised overdrafts

As well as charging interest under clause 7.6, we may also

charge our applicable fee for reviewing unauthorised

overdrafts each time your Bank Account or savings account

goes overdrawn, or further overdrawn, without an agreed

overdraft. We may also charge this fee when your Bank

Account goes over, or further over, any agreed

overdraft limit.

 

they now are calling it a fee, what is it a charge, a fee, a service........

 

a fee for a service, but why the mention of charge

a charge for a service, but this a fee for reveiw (what does this entail)

a service where the fee is a charge

a charge, but they call it a fee so they can try class it as a service

a fee that is a charge, services is talking about foreign currency accounts

a service that has a charge, but they call it a fee so not to confuse things

 

I would love for them to explain this, but feel they may have to choose wisely depending on who is challenging them.

 

 

 

NOW looking at there price list, they now call it a TARIFF

 

Additional services†

 

Stopped cheques £10 per cheque

Special presentation of a cheque £15 per item

Bankers Draft in sterling £15 per item

Electronic transfers £17.50 interbranch £20 interbank

Additional statements £1 each

 

==============================================

 

Unauthorised transactions you make

 

Guaranteed Cheques and Maestro transactions we have to pay £30 flat fee and £30 per transaction if repeated after the initial advice

 

Returned ('bounced') items up to £30 per item

 

 

 

 

the tariff does not refer to the o/d fees as being a service.

 

All I will say to my bank is be prepared for some cross examination.

[thoughtcriminal]

Assuming it *is* a service (and I don't for one minute believe it is) - the fees they charge have been agreed in advance. All the penalty charges we're talking about are incorporated into the Terms and Conditions and stated on the Tariff.

 

Supply of Goods and Services Act (Sale of Goods Act not relevant as it's a service rather than 'goods'):

 

"makes it clear that where the price of a service is not fixed at the time the contract is made, a reasonable price will be implied."

 

If it is a service, I think it's fairly clear that the price is fixed at the time the contract is made. Note that this provision doesn't prevent completely extortionate fees being charged, so long as they're agreed (look at Ticketmaster!)

 

If the courts accept that bouncing a cheque/DD is a service, I think we're sunk. In all honesty, though, I think it's clear that their aim is to deter people from breaking the contract by keeping sufficient money in their accounts. I think the bank would have a very hard job proving that this is a 'service.'

 

Plus, SOGSA seems like the kind of thing that might have been implemented in response to an EU directive. If this is the case, the consumers could make an Article 234 Reference to the European Court of Justice. Their judicial reasoning is very different from the UK tradition. Essentially, they tend to look more at the substance and general spirit of things than make narrow distinctions based on words. Even if the banks could manage to persuade the Lords that bouncing DDs was a service, then assuming there's a European element in SOGSA, we'd have a good chance in the ECJ.

[thoughtcriminal]

Assuming it *is* a service (and I don't for one minute believe it is) - the fees they charge have been agreed in advance. All the penalty charges we're talking about are incorporated into the Terms and Conditions and stated on the Tariff.

 

Supply of Goods and Services Act (Sale of Goods Act not relevant as it's a service rather than 'goods'):

 

"makes it clear that where the price of a service is not fixed at the time the contract is made, a reasonable price will be implied."

 

If it is a service, I think it's fairly clear that the price is fixed at the time the contract is made. Note that this provision doesn't prevent completely extortionate fees being charged, so long as they're agreed (look at Ticketmaster!)

 

If the courts accept that bouncing a cheque/DD is a service, I think we're sunk. In all honesty, though, I think it's clear that their aim is to deter people from breaking the contract by keeping sufficient money in their accounts. I think the bank would have a very hard job proving that this is a 'service.'

 

Plus, SOGSA seems like the kind of thing that might have been implemented in response to an EU directive. If this is the case, the consumers could make an Article 234 Reference to the European Court of Justice. Their judicial reasoning is very different from the UK tradition. Essentially, they tend to look more at the substance and general spirit of things than make narrow distinctions based on words. Even if the banks could manage to persuade the Lords that bouncing DDs was a service, then assuming there's a European element in SOGSA, we'd have a good chance in the ECJ.

[BankFodder]

It is true that one agrees certain fees at the beginning ofthe contract. however the Bank contract reserves the right to change these fees from time to time at their discretion and with notice.

 

It is this variation which I think becomes subject to s.15 SGSA. As soon as they bank departs from the orginally agreed fee then the agreed price no longer exists and the price is not one which can be determined by reference to the contract but must be determined by the s.15 implied term as to reasonableness.

Of course I would want to argue that there is no service at all, but I consider that it is a useful stop gap and produces a partial victory.

 

For those of us with older accounts where the fees were very small, it gives an excellent result.

[BankFodder]

It is true that one agrees certain fees at the beginning ofthe contract. however the Bank contract reserves the right to change these fees from time to time at their discretion and with notice.

 

It is this variation which I think becomes subject to s.15 SGSA. As soon as they bank departs from the orginally agreed fee then the agreed price no longer exists and the price is not one which can be determined by reference to the contract but must be determined by the s.15 implied term as to reasonableness.

Of course I would want to argue that there is no service at all, but I consider that it is a useful stop gap and produces a partial victory.

 

For those of us with older accounts where the fees were very small, it gives an excellent result.

[Bookworm]

What is reasonable has to be inferred from the facts but if it is correct that the cost of the banks "service" is only a few pence - maybe a pound, then surely a mark-up of many hundreds of percent will be excessive and certainly not reasonable. Most High Street businesses mark-up about 100% (books - much less). There seems to me no reason why the banks should reserve to themselves the right to exceed this established practice.

 

And surely, the argument is there that the additional and proportional interest levied on the extra amount borrowed is itself a fair and reasonable charge for the service? How does allowing the extra borrowing cost more than the existing one? In fact, surely, if I phone the bank and take someone's time to negotiate a higher overdraft, for instance, won't it cost more in terms of man-hours than if a payment is allowed through automatically? Thoughts?

[Bookworm]

What is reasonable has to be inferred from the facts but if it is correct that the cost of the banks "service" is only a few pence - maybe a pound, then surely a mark-up of many hundreds of percent will be excessive and certainly not reasonable. Most High Street businesses mark-up about 100% (books - much less). There seems to me no reason why the banks should reserve to themselves the right to exceed this established practice.

 

And surely, the argument is there that the additional and proportional interest levied on the extra amount borrowed is itself a fair and reasonable charge for the service? How does allowing the extra borrowing cost more than the existing one? In fact, surely, if I phone the bank and take someone's time to negotiate a higher overdraft, for instance, won't it cost more in terms of man-hours than if a payment is allowed through automatically? Thoughts?

[peterfoyle]

Supposing I tell my bank that I will not be requiring their 'bouncing' service???

[MondeoST24]

It is true that one agrees certain fees at the beginning ofthe contract. however the Bank contract reserves the right to change these fees from time to time at their discretion and with notice.

 

This is where I am stumbling, the case I am working on at present if for late fees/unpaid cheque/unpaid direct debit/overlimit fees on a Halifax credit card.

 

There are prices in the t+c's for all four items, and they are consistant with what I have been charged (i.e. they didn't increase half way through), so it seems to me the fees were "agreed" in advance, so does the reasonableness test still apply?

 

Are there additional arguments I can counter with if they use this defense?

[BankFodder]

It is true that one agrees certain fees at the beginning ofthe contract. however the Bank contract reserves the right to change these fees from time to time at their discretion and with notice.

 

This is where I am stumbling, the case I am working on at present if for late fees/unpaid cheque/unpaid direct debit/overlimit fees on a Halifax credit card.

 

There are prices in the t+c's for all four items, and they are consistant with what I have been charged (i.e. they didn't increase half way through), so it seems to me the fees were "agreed" in advance, so does the reasonableness test still apply?

 

Are there additional arguments I can counter with if they use this defense?

You've hit the one snag in the s,15 SGSA argument. If the charges are those which you originally agreed then it doesn't work.

It only works where they have moved away from the agreed price to a new price never previously discussed.

If they used the srvice argument you would have to try and convince the court that their so called service charge was really a cloak for a penalty.

There are several penalty cases where this point has come up and the courts have made it clear that they will try to recognise a penalty for what it really is rather than merely what it is called by the dominant party.

You might like to pm Diddled and ask for some help identifying these cases.

They would be useful for everyone.

 

Also you could argue that even as a service, the charges are an unreasonable indemnity under UCTA

[Natasha]

Supposing I tell my bank that I will not be requiring their 'bouncing' service???

 

That's exactly what i'm thinking!!

 

If i write to my bank and tell them that i would like my account to stay within the limit and if a transaction is going to make me overdrawn it has to be declined, can i do this?

[MondeoST24]

I'm just having a good look at these terms and conditions they have sent, its actually a copy of the agreement. Under section 1. Parties it says

 

The parties to this Agreement are Halifax plc, Trinity Road, Halifax, West Yorkshire, HX1 2RG and Mr Joe Bloggs, my address

 

However, the address is my current address, when I had this card I lived somewhere else. So its certainly not the agreement I signed, its been printed recently.

 

Might not be significant but I think I need the original signed agreement, then ill see if the charges section is the same.

[BankFodder]

Yes I agree. Are they really trying to pass off this agreement as the one to which you originally agreeed?

 

Follow it up.

[nailson]

forgive me if I'm covering old ground because I'm new on here.

But looking at this thread I have these points:

1 - If your bank bounces a cheque, they shouldn't be able to charge you for this - they are 'selling' you something that you didn't ask for. They are not providing a service because you have neither asked for it or benifited from it !! also, dictionary.com provides this:

Service, n

*Work done for others as an occupation or business: has done service for us as a consultant.

*An act or a variety of work done for others, especially for pay: offers a superior service to that of his competitors; provides full catering services.

*A facility providing the public with the use of something, such as water or transportation. *tr.v. ser·viced, ser·vic·ing, ser·vic·es

To make fit for use; adjust, repair, or maintain: service a car.

To provide services to.

To make interest payments on (a debt).

 

note the bit in bold - a service is something for your benefit!!

 

2 - if they you to go over your limit they triple the interest rate you have to pay and often charge you for advice letters - a win-win situation for the bank then.

 

3 - bank charges are illigal under the Unfair Terms in Consumer Contracts Regulations 1999 because you have no power to negotiate, the prices are pretty much fixed & standard from bank to bank and they are to the deitriment of the consumer.

Extract from the Unfair Terms in Consumer Contracts Regulations 1999

 

Unfair Terms

5. - (1) A contractual term which has not been individually negotiated shall be regarded as unfair if, contrary to the requirement of good faith, it causes a significant imbalance in the parties' rights and obligations arising under the contract, to the detriment of the consumer.

 

© Crown Copyright 1999

Also, note that CORGI only charges £2.50 to send out around 3 letters to 3 different addresses (a non-profit making establishment doesn't hammer you, you see) - charging around £30 for the sama similar service is therefore, unfair.

[BankFodder]

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