OFT Test Case against the Banks
The Appeal by the banks to the House of Lords will be heard over a three day period starting 22nd June. However, it will still take some time before all the issues are resolved. Even assuming the OFT wins and the banks decide not to refer the matter to the European Court, the OFT will still have to finish its own investigation, which has been on-going since early 2007. Commentators do not believe that there is any likelehood of a resolution before 2010.
Other Matters
The OFT’s investigation into credit card charges left many unresolved matters. The investigation into bank charges is also likely to leave many loose ends. Here are some possible examples:
How much will be deducted by the bank from each charge before it is repaid to the client? Currently the credit card companies are retaining £12 per charge.
The interest that the banks will be forced to pay may not be determined. Statutory interest of 8% is insignificant when people have incurred interest of as much as 29.9% for exceeding their overdraft limits. Furthermore statutory interest is only payable if a matter is taken to court.
The banks will obviously not agree with the OFT’s findings, but may only be obliged to accommodate it by making “goodwill” payments. If that is the outcome, it may present them with another way to escape paying interest as compensation to their customers.
It may be unclear how the increasing rates of charges made by the banks over the years will be treated. Some banks increased charges by as much as 300% during the 6 years from 2001 to 2007. One bank, in particular, was charging £5 per day to clients who exceeded their overdraft limits in 2001, but by 2007 it was charging £15 per day. A figure based on today’s prices will fail to address the historic claims.
PERSONAL ACCOUNTS
Bank charges claims for personal account customers
We are now working with clients on a case-by-case basis to recover charges by making additional claims that we can take to the banks and, if necessary, the Ombudsman. These claims, which are in addition to the unfair charges claims, are made on the basis that the bank may have been in breach of the Bank Code in its past (pre-June 2007) dealings with clients rather than on the basis that its charges were unfair . The Bank Code is a code of practice to which banks that are members of the British Bankers Association (BBA) are meant to adhere. All the high street banks are members of the BBA.
The success of these alternative claims is entirely dependant on the complainant’s particular circumstances at the time they started incurring charges. Please call us if you wish to discuss your claim in more detail. In particular, you should discuss your claim with us, if during the past 8 years you have:
become unemployed,
relocated your job,
become disabled,
suffered a serious illness,
had high medical bills,
suffered the death of a partner,
started a lower-paid job,
had parental/carer leave,
started full-time education or
suffered any other change that was particularly detrimental to your finances.
BUSINESS ACCOUNTS
Bank charges claims for business account customers
Mr Justice Andrew Smith, the judge that presided over the OFT’s test case against the banks, ruled that default charges were NOT in fact penalties. He was, of course, only considering contracts between the banks and their personal (non-business) customers. However it may now be difficult and extremely expensive and risky to try to recover these charges in court. Furthermore, businesses are not protected by the Unfair Terms and Conditions in Contracts Regulations, which is the basis of the OFT’s test case and which relates only to consumers and personal bank accounts. So the outcome of the OFT test case is unlikely to help businesses reclaim their historic charges.
Nevertheless, we are achieving some success on behalf of businesses by making claims on a case-by-case basis. The success or failure of these claims depends on the circumstances of each case.
Please call us if you wish to discuss your claim in more detail. In particular, you should discuss your claim with us if during the past 6 years you have suffered any of the following changes to your business:
Detrimental changes in trading conditions
Significant bad debts
Loss or illness of key employees
Loss or illness of key management staff
Partnership splits
Costly litigation
Adverse or costly Tax or VAT investigations
Other significant events for which you were not insured
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