Tuesday 15 December 2009

Bank charges update: 'where are we now?'

GLC had instructed a senior team of London barristers with expertise in UK banking law on behalf of Martin Lewis of MoneySavingExpert.com (MSE) with a view to identifying stateable legal routes forward, following the Supreme Court's ruling last month. That initial work is complete. There are two possible ways forward.

First, as the Supreme Court itself noted, it remains open to the OFT (and indeed individual consumers) to challenge the legal fairness of bank charges under regulation 5(1) of the Unfair Terms in Consumer Contract Regulations 1999 (UTCCR). Secondly, some consumers may be able to found upon sections 140A and 140B of the Consumer Credit Act 1974 and argue that the terms of contract which permit their bank to levy charges are an 'unfair relationship'due to excessive cost, among other arguments. The onus of proof under s.140B of the CCA is upon the banks to prove otherwise.

A good summary of these arguments has been posted on MSE here.

No amended template documents have been produced at this stage, because it has become apparent that the best solution in the public interest, is for the OFT to raise fresh proceedings against the banks and take further enforcement action. Why?

There are various reasons, including (a) an estimated 12 million UK consumers have paid bank charges in the past and it is unrealistic, unreasonable and impractical to expect all of them to be able to take personal action to reclaim these charges, (b) if the OFT does not take action, there will be widespread scope for claims management companies and 'claims farmers' who operate in a parasitical, viral way, to make a lot of money (e.g. a 40% take of your award, with upfront costs on top)by exploiting vulnerable members of the public.

And finally,(c)the skill and arguments necessary to present claims in adversarial court proceedings is likely to be beyond most party litigants (we saw this in the Hull strike-out cases, where GLC as part of the UK unfair bank charges legal team had to undertake a huge amount of amendment work, with Mr Raymond Cox QC appearing on our clients behalf, in order to stop 44 cases being struck out - we won, but it was a massive amount of work).

If the OFT did decide to take up the new legal challenge(s), and subsequently won, then consumers would be able to seek a refund without the need to pay anyone at all. Furthermore, if the OFT continued its legal challenge this should prevent one million current claims being rejected. If the OFT ultimately, decide not to take this issue forward then we will need to carefully consider our strategy. The OFT are expected to make a decision in the next few days - so watch this space.

Meantime, in Scotland, GLC has enrolled applications to recall sists (stays) in bank charges cases with a view to obtaining compensation for some of our clients in the South West of Glasgow. This is a completely free service, as we are charitable, community law centre. At this stage, we cannot offer this service to non-existing clients or clients outwith the South of Glasgow given resource implications, and the fact a large proportion of our resources are currently dedicated to preventing homelessness, defending eviction and repossession cases across Scotland.

However, we will report on any progress that we can make, with a view to helping consumers strategically in Scotland and in the UK generally.


  1. Lord Justice Smith's judgement drives a coach & horses through the Act. What is required is a retroactive clause in the finance bill to restore the law to what almost everyone else thought it was. Should the Govan Law Centre organise a letter writing campaign to MPs? 1.2 letters to MPs immediately prior to an election might be effective.

  2. There is general presumption in law against retrospective provisions, and law-makers tend to avoid these for all sorts of reasons (e.g. retrospectively moving the goal posts means you could never rely on the law). It's also fair to say, if this were possible, there would remain all sorts of challenges available under the Human Rights Act 1998. The problem was when the UTCCR Directive was implemented by the UK Government it was at a time of 'light touch' regulation, and as the Supreme Court observed, the UK could have implemented the UTCCR with more teeth to protect consumers. However, the regulations still have teeth in terms of Reg 5(1), and it is also fair to say the banks and OFT hammered out a very narrow and tight focus for their litigation. Which ultimately came back to bite the OFT. But it's not over yet!

  3. I understand the reasons why it has been decided by Money Saving Expert not to publish new self-help template letters. Certainly some of the arguments are complex and some do appear to appear more exotic than others. It is difficult to imagine many consumers possibly being sufficiently skilled or even prepared to stand in a Sheriff Court and make some of the alternative arguments that have been decided. Also, clearly,several arguments would have to be used in many cases and would depend on the facts of the consumers case.

    That said, however, there is a part of me which has reservations. The success of the bank charge campaign is that it was a consumer led campaign. Part of me feels self help guides should be provided. There is a part of me which worries this decision is being taken on behalf of consumers, which undermines the whole spirit of the campaign. Further, should the OFT raise another test case? For what purpose, to have everything placed on hold for another two years while charges still apply. Surely there is an argument the mass campaign should continue, not some narrow legal one of test cases. Arguably another wave of attacks by consumers will make the banks position untentable to themselves commercially and to politicians politically.

  4. Was it the money laid aside to pay back bank charges that was going to be used for the massive Christmas bonus to the bankers that the government have helped out? So my guess is that it was customers money that has been lost, taken from our accounts and used to pay these people a bit extra for Christmas. They should try working for £11,ooo a year! Bet they wouldn't be able to keep that up, like me who struggles every day of the year and was struggling 6 years ago to go to college to get a qualification to try a make a better life for my family. Not easy, but I'm sure they don't care the public will bale them out again if anything goes wrong.

  5. The OFT were prevented from going to 'Europe' by the Supreme Court. Could an individual claimant request this, & on what grounds? (After all, the UTTCRs started life there)