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So the campaign has finally succeeded. 

  Almost four years of challenge and conflict with the banking industry and the main issue on bank charges has been won - but the fall-out is only just beginning.

 

Repayment: how will bank charges be repaid?

Proactively or on demand

How much will be repaid under a FSA repayment scheme?

 The entire charge?

or the difference between the actual charge and the OFT suggested fair rate?

  

UTCCR 1999 makes no provision for partial validity of unfair terms.  It is all or nothing.  A judge would be obliged to award the entire charge to the customer in the absence of some valid counterclaim from the bank.

If the FSA approved a differential charge then they or the Oft would have to come up with a formula which allowed a differential to be paid on historical charges which were lower than today.  For instance, charges in 1995 might typically have been £10.  Would they really be able to say that a figure of 25% of any charge was a fair charge.  Or rather than a formula, would they have to examine the charges level for each year and come up with a specific fair figure for that year.

 Discussion on the Consumer Action Group forum

 

 Personal data disclosoure

 
Mainly, people who want to claim their bank charges back will have to ask for account information from the banks in order to calculate their bank charges.

 

 

·         Will the FSA require that banks cooperate with statutory requests for data?

·         Will the FSA instruct the banks not to destroy account histories during the repayment period?

 

 

We are receiving a certain amount of anecdotal and also documentary evidence that banks are starting to be uncooperative in the provision of data.  We are receiving reports that banks are now saying to some of their customers that they do not hold data longer than 6 or 7 years. 

We have good evidence that such trends are quite new and that they have in the past provided data at least up until 1995.

 Discussion on the Consumer Action Group forum

 

How far back will repayments go?

 The conventional wisdom is that claim can go back six years. The FSA waiver has frozen the conventional limitation period so that aims can go back to 2001. The law would allow claims to go back to 1995.

 

·         Will the FSA instruct banks to pay out money going back to 1995?

·         Or will this issue have to be litigated by bank customers?

 Discussion on the Consumer Action Group forum

 

How long will customers have to submit a claim for repayment?

 Under the Limitation Act, customers will have 6 years from the date of the final OFT ruling of unfairness to bring their claims (the date that the mistake of law was discovered).  This means that their claims will not become statute barred until at least 2015

  

·         Will an FSA repayment scheme recognise such a long period of time or will they introduce a shorter period after which customers must rely on the goodwill of the bank or else litigate?

 Discussion on the Consumer Action Group forum

 

What level of compensation would be offered as part of the repayment scheme?

 ·         The standard County Court and ombudsman 8%

·         or a larger rate of interest?

 

 

 Both the financial ombudsman and the FSA make it clear that compensation awards should be calculated in the way which restores any losses to the customer.

If customers decided to litigate might they be able to claim restitutionary damages? (disgorgement of profits earned as a result of unjust enrichment).

 Discussion on the Consumer Action Group forum

 

Consolidation loans.

 Where people have taken Consolidation or other loans to deal with bank charges debt (and many people have)  -- they should be able to claim back the interest on those loans because effectively they were only borrowing their own money.

 

·         Would this be recognised by an FSA scheme?

·         Or would customers have to make specific claims and if necessary litigate?

 Once again, the ombudsman and the FSA has stated that compensatory awards should be calculated to provide a sum which restores any losses to the customer. A mere 8% would not achieve this, where a customer had been obliged to borrow money either from his own bank or elsewhere in order to replace money which had been seized from him by way of bank charges.

  Discussion on the Consumer Action Group forum

 

Third Party loans

A large number of people will have taken out loans effectively to replace money taken from them unfairly by the banks.  Many of these people will have been obliged to borrow from sub-prime lenders because their credit ratings will have been damaged by placing of bank-charges-related entries onto their credit files.

 

·         Will a provision be made by the FSA or by the banks for the reimbursement of interest where the 3^rd party loans have been taken to replace money unfairly taken by banks?

Discussion on the Consumer Action Group forum
 

Debt collection agencies

An enormous number of debts which are passed to -- or even sold onto -- debt collection agencies are debts which are comprised wholly or very substantially of bank charges.  Debt collection activity on these accounts will have to cease.

 

·         How will debt collection activity on these debts be stopped?

 

 

·         Will banks be able to contact all debt collection agencies and recall charges related debts?

 Discussion on the Consumer Action Group forum

 

 Credit reference agency files

 Most people who have run into debt will have been defaulted on their credit file either by their bank or by a debt collection agency -- or both.

 Where these negative entries relate to bank charges related debt -- wholly or substantially comprised of bank charges, how will be debt collection agencies and the banks deal with the removal of these credit file entries?

 

·         Will removal be proactive?

·         Or only on demand?

 ·         Would removal mean complete deletion of the negative entry?

·         Or simply some correction or some clarification or explanation?

 Discussion on the Consumer Action Group forum

 

Credit default entries placed by third party lenders

 Bank customers who have been obliged to borrow money from sub-prime lenders to replace money taken unfairly by banks may have not been able to meet their loan obligations because of the high cost of credit.  Had they not been the victim of unfair bank charges they would not have been faced with the problem of having to borrow money elsewhere or else they would not have been saddled with a very high cost of credit.

  

·         Might there be any provision for the removal of such negative entries on the basis that “but for” the unlawful seizure of their money they would not have had to seek loans from the sub-prime market?

  

Without such a provision, customers would be obliged to litigate against the banks and include this circumstance as a head of damage.

My view is that in most bank charges litigation on these kinds of charges-related issues, customers are likely to get a pretty sympathetic ear from the judge.

 

 

Customers who have suffered loss or distress as a result of bank charges related entries on their credit file. 

 The data protection act gives the power to the court to order damages in the circumstances. (Last year, a Scottish court awarded a claimant £116,000 because of damage caused by inaccurate data. Recognise losses included loss of opportunity on the market). Losses could even include being obliged to pay more for credit because of a damaged credit reputation.

 

·         Would customers be required to litigate or will the FSA implement a provision for compensation for customers which does not need litigation?

Discussion on the Consumer Action Group forum

 

Bank charges refunds -- where will the money eventually go?

Estimates are that the banks liability to repay could be anything from £22 billion-£50 billion and maybe even more.

When tens of billions of pounds are returned to customers within a fairly short space of time (two years?) A lot of this money will be returned to the high Street.

 

·         What effect will this sudden injection of a large amount of money in the hands of consumers mean for the high Street? It must have some significant effect.

 

Discussion on the Consumer Action Group forum