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Bank Charges Test Case - The Facts
Background
The banks decided in July 2007 to go to court along with the Office of Fair Trading to clarify the law on current account charges.
This is because some customers said that the charges levied when customers sought to borrow from banks without prior discussion were penalties or that they were unfair. They started to claim back bank charges they had built up, citing a piece of European regulation – the Unfair Terms in Consumer Contracts Regulations 1999 (UTCCRs) - to back up their action.
It became apparent to the banks, the Office of Fair Trading, the Financial Services Authority and the Financial Ombudsman Service that steps had to be taken to deal with the significant volumes of customer disputes in a fair and orderly way. In the end the only way this could be resolved was by seeking court guidance on these areas of law. As there was considerable public interest, the banks and the Office of Fair Trading thought it was sufficiently important for the issues to be fully tested in court.
What has happened so far
The first stage of the test case process was heard by the Court between 17 January and 8 February 2008. It dealt with certain preliminary legal issues in relation to the terms and conditions used by the banks at that time.
On 24 April 2008 the High Court issued its judgment on the first stage of the test case process. It decided that the current charges could not be penalties but they could be assessed for fairness under the Unfair Terms in Consumer Contracts Regulations 1999. The banks appealed the decision, that the charges could be assessed for fairness, to the Court of Appeal at a hearing which ended on 5 November 2008.
Following further hearings, the High Court also decided that the terms and conditions previously used by the banks were incapable of being penalties but, like the banks’ current charges, they can be assessed for fairness.
On 26 February 2009, the Court of Appeal issued its judgment on this first stage of the test case process and ruled the banks’ current terms can be assessed for fairness under UTCCRs. The banks appealed the Court of Appeal’s judgment.
On the 25th November the Supreme Court ruled that the banks charges could not be assessed for fairness.
Where are we now
After the initial considerable disappointment, we have started to reflect on the ruling and the comments made by the Law Lords, all of which points to the fact that the banks won a victory on a technicality of a small point in law. In turn the FSA has removed it’s waiver that not only protects claims but also protects the banks from concluding claims.
Lord Walker said in the judgment that ‘this decision is not the end of the matter’. Leaving other avenues open to look at claims through different parts of the Unfair Terms in Consumer Contracts.
The Oft, FSA, British Bankers Association and the banks are in discussion to resolve all claims swiftly. Where we are waiting for the OFT to announce how it intends to respond to the judgment, details of which we are due to find out in the next couple of weeks.
Now that the waiver is no longer in place the banks must either resolve or provide a letter of deadlock confirming their internal complaints process is concluded on all claims within the next 8 weeks.
Without the constraints of the waiver we can now pursue the claim and are at present waiting for the first contact from the banks regarding this. Because of the timescales involved in dealing with complaints if you receive any form of contact from the bank could you either email, fax or post a copy to me at our office.
If the banks do not wish to conclude the claim satisfactorily in the 8 week period we can then complete a report for submission to the Financial Ombudsman on two grounds, one being financial distress, an area which is covered in the new banking regulation, and secondly the legal aspects not covered by the Supreme Court’s judgment.
Bank Complaints has been dealing with complaints for almost 12 years and our motto is that we never give up. By giving up the banks will win, and that never achieves anything.
As such we are most certainly open for business and will provide updates and details to clients as soon as we have them. If you have friends or relatives who wish to lodge claims then this may be an ideal time for us to submit claims on their behalf.
For more information on the Office of Fair Trading statement click here
For more information on the Financial Services statement click here
For more information on the Ombudsman statement click here
