Getting a fair deal for all from the high street banks
Possibly more than 6 million people in the UK are thought to be victims of illegal or unfair bank charges on the high street and this situation is continuing unabated daily.
(existing customers)
The OFT, the FSA and the Banking Ombudsman who are there to safeguard customers appear to have failed in their duties. Customers took matters into their own hands and were successfully winning their claims through the courts or by negotiated settlement until the OFT intervened and unwittingly removed all legal rights from those customers. It should be remembered that prior to the OFT’s intervention the banks had refunded customers more than £400m – an emphatic admission of guilt.
(Future customers)
The financial affairs of every adult in this country are conducted through the banks. Every adult is at the mercy of the banks.
It is in the UK’s interest that we have a good banking system and that the banks are allowed to make a fair profit; but it is also in the UK’s interest to ensure that the banks are properly and actively supervised, that customers are protected and not abused, as they clearly have been. Charges should be transparent and consumers should benefit from the reduced charges that will result if banks are forced to compete with each other for business.
We are aware that this government is concerned about the low level of personal savings in the UK and the financial burden this country will suffer if that situation is not improved. Our experience is that each customer that has a claim is on average out of pocket by approximately £3,000. To put that figure in perspective it should be compared to each household’s average savings.
What is the case against the banks and what is being done?
Complaints against bank charges are well documented, appearing regularly in the press. Grievances brought to our attention recently also lead us to wonder how effectively anti-competitive trading law is working in the high street banking sector.
The case against the banks is twofold:
- The banks have penalised customers who breach the terms and conditions of their agreements. A penalty is defined as a charge which is so excessive it bears no relationship to the cost of remedying that breach and is unlawful.
A number of leading economists, who have been quoted in various media, believe that the cost to the bank of returning a cheque or direct debit is approximately £2.50 to £4.00; the banks charge anything from £30 to £39.
- High street banks appear to have engaged in anti-competitive practices by tacitly agreeing to keep these charges artificially high, in some people’s view acting like a cartel.
The banks’ defence
The banks defend their charges by stating that they are charging service fees in accordance with their terms and conditions which are agreed by customers. The banks know that they have no real defence and it is for this reason that prior to the OFT’s latest intervention the banks refunded customers more than £400m – an emphatic admission of guilt.
In September 2006, after it completed an inquiry into credit card charges, the OFT stated its intention to investigate the banks. The official watchdog on trading practices deferred an announcement due in March to an unspecified date later this year. In July of this year the OFT, in the opinion of ourselves and many others, made matters much worse for bank customers by declaring that they would bring a test case against eight banks to obtain a ruling that the regulations relating to unfair terms in contracts apply to bank charges as if they were sales.
The problem with the OFT’s decision to take the banks to court is:
- It has missed the argument that these are penalty charges for defaults by customers, and therefore unlawful per se.
- It has unwittingly helped the banks by freezing up all court actions brought by individuals against the banks. There are in excess of 1 million cases being held over until this case is resolved. Individuals, for the first time in recent history, have now lost the right of legal redress. Many of the claimants are amongst the most disadvantaged in our society.
- The banks can now charge their customers anything they like and their customers have no legal redress.
- When the banks lose they will almost certainly win the right to appeal to the House of Lords and customers may well remain in this situation for a further 6 to 9 months following the hearing of this case.
The problem with the OFT’s investigation into the charges and pricing behaviour of the banks is:
- There is a feeling that the banks and credit card companies are constantly outwitting the OFT. The fact that the OFT set default charges at £12 per item for credit card companies is seen as proof. A similar finding for bank charges will fly in the face of all the research that has been done. The mishandling of the court case is seen as further evidence.
- It apparently will not look into the possibility that the banks apply such identical charges irrespective of the cost to the bank of the defaults that it is impossible not to construe their behaviour as a cartel in breach of anti competition law and EU law. Although it is understood this may involve criminal proceedings no one understands why the OFT has not looked into this too.
The general consensus is that unwittingly the government, the OFT the FSA and the Banking Ombudsman have collectively managed to help the banks at the expense of bank customers either through their inaction in dealing with an apparent cartel over the last 6 years, the OFT’s failure to complete its investigation and finally its decision to take the banks to Court with an inadequate case.
It would seem that consumers have been badly let down. In particular those that have been most affected are people and families on lower incomes. It is frequently those who lack the confidence, education or skills to escape financial difficulties or challenge a bank when they incur charges that suffer hardest. Most need advice and support to make a counterclaim against their high street bank. They are also the most in need of swift reimbursement when charges have been proved unfair
About Financial Claims Ltd
We set up Financial Claims Ltd to champion, coordinate and pursue the case for action against unfair bank charges. In addition to keeping pressure on the government, its watchdogs and regulatory bodies, and the banks themselves, to guarantee fair and above board practices on the UK high street, we also help individual customers to recover default charges unlawfully deducted from their accounts. Financial Claims Ltd is a private company, and we feel very strongly about the moral aspect of this situation. We would be happy to offer feedback from customers on the support and services we have provided them. We are currently handling over 13,500 claims for 9,000 clients and we estimate that they represent a figure in excess of £25m.
How you can help:
It is vital to maintain momentum and get a fair deal for customers who have not had their voice properly heard. The suggestion that high street banks are operating as a cartel requires genuine, open investigation. People who have been charged unfair or illegal levies are personally due a repayment.
The OFT is a non-ministerial department, but it is accountable to Parliament and can be scrutinised by MPs. Our clients would appreciate any support that encourages the watchdog and the government to look more closely into the fairness of high street banks’ default charges and banking operations, ensuring too that the growing backlog of cases reach a fair and proper conclusion.
Please consider raising this important matter in Parliament and with the key government departments concerned, the OFT, HM Treasury and the Department for Business, Enterprise and Regulatory Reform.
Financial Claims Ltd would very much like to meet and discuss the matter with you in greater in depth. We would be happy to answer any questions you may have and grateful for any advice you are able to offer.
Thank you.
Financial Claims Ltd.
October 2007 |
