Unfair bank Charges
Update following the ruling in the High Court dated 25th November 2009
The banks first lost in the High Court and then in the Court of Appeal, but in a shock decision in November 2009, the new Supreme Court overturned this on a technicality and it was decided that ‘fairness rules' didn't apply Yet it wasn't 100% clear cut, as the court prominently stated the ruling didn't stop the OFT assessing fairness on other grounds. So until we can work out the best way forward we would advise....”DON’T DESPAIR”.
If we all put our heads together we’re sure that there is still a ‘legal’ loophole we can exploit.
The Supreme Court overturned rulings in the High Court and Court of Appeal that bank charges were subject to fairness rules, under ‘clause 6' of what's called the UTCCR regulations. However, it's now becoming clear the banks' victory is far from clear cut.
Below are some questions that might clear the air a little..
Q. What was decided exactly?
A. The case was all about whether the £35-ish a time charges banks levy when you go beyond your unauthorised overdraft limit were lawful. Yet it was based on a very specific piece of law. Had the banks lost, the Office of Fair Trading, which has provisionally said charges are unjust, would have decided whether such fees are indeed unfair.
Q. Does the hardship rule still apply? Can I still claim if I'm in hardship?
A. The FSA's hold on banks dealing with the reclaim has been lifted, so there is no longer a specific hardship rule. However, under FSA rules, banks must treat you fairly and be considerate if you are in hardship. If you think that hasn't happened you can complain to the Ombudsman (see How to complain to the Ombudsman guide).
Q. My case is on hold with the courts, what is going to happen?
A. It has yet to be decided whether the hold on all cases in the courts will be lifted. The Judicial office says each complainant, for now, will have to apply individually for their case to be heard. However, we believe the Supreme Court judge today indicated you can claim under another law.
Q. What if my case is on hold with the Ombudsman?
A. There are 15,000 cases on hold with the Ombudsman, and it has not yet made a decision on what will happen; it is currently studying the ruling.
Q. My case is on hold with the banks, what is going to happen?
A. The banks have eight weeks to deal with it and it is likely they are going to be swamped. When they do deal with your case, it's likely to be thrown out if your argument was based the premise of the OFT's original argument, mainly that the value of fees was disproportionate.
However, we are looking to see if you can re-claim under a different rule, but the case of hardship still applies, until further notice.
Q. If my bank rejects the case can I try again?
A. We are looking to see if there is a different legal avenue people may be able to complain under. If that pans out, it is likely you will be able to complain again.
Q. I haven't yet put in a claim, what's should I do?
A. If you are experiencing financial hardship, we would suggest you go down that route.
Q. How likely is it I will get my money back?
A. Much less likely than first thing this morning, but not impossible. Having read more info, things are looking slightly brighter than when we first heard the result this morning – but still the best thing to do is plan for getting nothing, but cross your fingers.
Q. How likely is it charges will be lowered?
A. Very likely. There is political will for this to happen and the OFT will continue to investigate whether charges are fair. It is likely we will soon see the end to such high charges for going beyond your overdraft limit.
Q. What is this new ruling that you think may bring hope to reclaimers?
A. While clause 6 was the bit about 'fees shouldn’t be disproportionately higher than the cost to the company' clause 5 is actually simpler and looks at the fact that as people's contracts with the banks' weren’t negotiated individually they must be in good faith, and not cause a significant imbalance to the detriment of the consumer. We believe there IS detriment to the consumer and the judge was trying to hint at that. The judge's other main verbal point was the Supreme Court believes overdraft costs are part of the price of a bank account – and if so they come under the FSA's jurisdiction. That may well have been a signal that consumers can make a misselling claim.
The fact remains that when you exceed your overdraft limit or a cheque bounces you are technically in breach of contract because you signed the conditions saying that you would stay within the authorized limit. However, the legal remedy is for the bank to only claim whatever actual losses it has suffered due to your actions. This is enshrined in cases as old as Robinson v Harman [1848] 1 Exch 850
For example, the bank might be able to argue that you should pay additional interest on the additional borrowing or even a very small sum for the cost of the automated letter and stamp. It is commonly thought that these costs are a maximum of £2.50 and the banks are reluctant to prove otherwise.
This means that the charges of £20, £30 or £40 are penalties or fines (not losses) and are simply unfair terms and not lawful due to the provisions of the Unfair Contract Terms Act 1977.
Good news - the law is on your side. Bad news, the banks are unlikely to simply pay back billions of pounds without being forced to.
We have specialists in these types of claims and know exactly how to win your case and want to help you.
We will take whatever steps we can to win your case. We will:
Obtain the correct records (evidence)
Assess the value of your claim which will also include statutory interest
Communicate with your bank or their nominated solicitors
Negotiate the highest possible amount
Assess the reasonableness of any offers made
Chase your cheque after the dispute is resolved
If the bank does not settle your claim, then we will refer your case to The Financial Services Ombudsman and manage the whole process.
We will discuss your options at every stage of the case and give you our firm recommendations.
It is a commonly held belief that you cannot pursue ‘unfair bank charges’ whilst the courts are making a ruling. Not correct.
If you have a case of genuine financial difficulty or hardship, your bank or building society must still deal with your complaint. This may involve – or not – the repayment of charges. See the Banking Code (although you will have to plough through quite a bit of ‘bumph’),for how they can help. If you're not happy with the firm's response to your complaint, you can take it to the Ombudsman, who will consider whether your complaint can be dealt with before the test case process is resolved. Read More
Or take the easy option...and let us help you for just £5.00 to cover the cost of our administration.
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