The Bank Charges decision - where to now.

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However - please also read this new developement:-

Bank charges - important new development

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The Supreme Court bank charges decision in November 2009 effectively blocked the Consumer Bank Charges Revolution which was started in January 2006.
The Supreme Court's decision made it clear that the unfairness -- or otherwise -- on its own, of bank charges was not a ground for challenging their validity and for claiming reimbursement.
The Supreme Court said that the reason for this was that as bank charges apparently have become part of the UK banking industry's core business, they did not fall to be assessed for fairness under Regulation six of the Unfair Terms in Consumer Contracts Regulations by the OFT or by the courts.

(However, if your charges come from a loan company or some other non-current account provider/bank - then you may be able to claim your charges -see here)

However, the Supreme Court threw in a teaser: that their judgement did not necessarily block the way for bank charges refunds. The Court said that there were other avenues which could be explored under Regulation five of the Unfair Terms in Consumer Contracts Regulations.

Since then there has been an enormous amount of discussion as to how claims for bank charges refunds under Regulation five might successfully be made.
Regulation five deals with the quality of the supplier/consumer relationship. Regulation five is not directly concerned with the fairness of the bank charges. Regulation five is more concerned with the fairness of the circumstances in which the bank charges have been applied.
It should also be pointed out that Regulation five is not only concerned with bank charges. Regulation five refers to any term of any consumer contract which is imposed unfairly

upon the consumer, in breach of the requirements of good faith and in which the consumer suffers a detriment.
This is very wide stuff.
On the face of it, Regulation five might be thought to be designed to drive a coach and horses through the entire bank charges regime which has been imposed by UK banks on their customers for over 20 years. There is no doubt that bank charges are unfair. They are disproportionate. They are used to cross-subsidise the industry helping to provide cheap banking services for those who have money -- paid for by those who have none. Everyone knows that they are unfair. The OFT has already said that they believe that they are unfair. They are so unfair that even some of the banks themselves have often lied about them in an attempt to justify their high levels. Most of the banks have even gone to the expense of rewriting their contractual terms and conditions so as to present their charges in a way which is either more palatable or more justifiable at law.

However, this is not the way that Regulation five seems to work. Even a QC, specifically instructed to examine the possibilities and to find a solution has not been able to identify a reliable argument for a general challenge to the legitimacy of bank charges under Regulation five. There is no criticism here of the QC. It is simply that Regulation five appears not to provide a method for obtaining general refunds.

Regulation five is concerned with the quality of the supplier/consumer relationship. However although it might appear to give consumers an opportunity to say that bank charges are unfair because they are paying an excessively high price for something which costs the bank only a very small amount of money, I do not believe that this is its effect; or at least I do not believe that this argument is likely to be upheld by the courts.
It seems that the bank charges QC probably thinks so as well because we haven't been presented with any solutions.

I think that Regulation five invites challenges to the supplier/consumer relationship on a case-by-case basis. This does not mean that individuals can claim that the charges they have received are excessive and that therefore they can get them back. I don't think that the courts are prepared to go down this road anymore. I think that the courts rather fatigued and wary of the tsunami of consumer claims which have been brought in the courts over the last four years: they don't want to see it happening again.
My view is that to bring a successful Regulation five challenge it is necessary to point to a specific instance of unfair treatment at the hands of the bank and which has produced some loss -- for instance, unmerited bank charges. My own view the moment is that claims which are brought specifically on the issue of the fairness of charges have no chance of success in the courts.
Examples of specific unfair treatment might include,

• incorrect operation of direct debit instructions
• inaccurate recording of customer details onto customer files
• peremptory closure of customer accounts
• peremptory withdrawal of overdraft facilities
• unreasonable demands for repayment of overdrafts
• failure to discuss account problems or overdraft problems in a sympathetic and positive way
• failure to communicate correctly or adequately with the customer
• unreasonably prioritising the bank's own interests over those of the customer when dealing with customer problems
• not giving due regard to customer interests
• evidence of deceptive practice by your bank

Don't forget, that you will have to have evidence of the unfair treatment and you will aslo have to show that the unfair treatment resulted in the loss which you are claiming for.

This is not an exhaustive list and there are thousands of these kinds of examples which are contained in real stories on the Consumer Action Group website -- and many other examples which are not contained in this list.

The point is that it is most unlikely that there is any basis for a mass refund of historical charges. However, if you are able to show that your charges were initially incurred as a result of some failing by your bank or because they treated you unfairly in some way, then you may have a very good chance of recovering your losses.

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written by adamc6671, February 04, 2010

A very well written piece, which very clearly sets out where we are now, and why. It pretty much echoes that which I have felt ever since the Supreme Court judgement was published. It seems very unlikely that there is a 'mass' way forward now, and each individual is going to have to tackle their court case on their own, together with the huge risks that are entailed in doing that.

It is a huge shame, but no great surprise to me - 'The Establishment', having had to bail several banks out massively in the recent past was, I believe, never going to put itself in the position of having to do that again.

Does this mean that Govan Law Centre, et al, are no longer seeking a way forward?

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written by BankFodder, February 04, 2010

Thanks for the compliments. I doubt whether many others will find the piece quite as praiseworthy.
I have to take issue on the question of risks, though.

Most claims will be brought on the Small Claims Track. There will be no risk as to costs. Furthermore, I expect that when there are claims put forward with very clear merits, that the County Court judges will be pretty sympathetic and will treat the banks quite aggressively.

Once people obtain judgment on the issue of unfairness, these judgments should be sent as part of a complaint to the FSA under the new Conduct regs which came in force Nov 1 2009.
The FSA will be obliged to take notice when faced with a formal judgment.

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written by adamc6671, February 04, 2010

Thanks for the reply Bankfodder.

My worry on the risk matter is that my, and many other, claims have been at court for a long time and the 8% statutory interest that has been accruing over that time could well take the claim above the Small Claims track limit. Or does the interest not count toward that limit?

The other, unanswered, question was 'Are the Govan Law Centre and others still looking at a way forward under UTCCR Section 5 and Consumer Credit Act 1974', or has that work now come to an end?

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written by BankFodder, February 04, 2010

I am not aware of any conclusions that have been arrived at by anyone else. I believe that people are still discussing possibilities but my own view is that general historical refunds without specific evidence of related unfair treatment is no longer a runner.

I expect that the fact that Govan and MSE haven't come up with any specific solutions is a very strong indication that there aren't any.
Mike Dailly of Govan is an experienced solicitor, and I know that Martin Lewis started consulting with the QC on the same afternoon as the Supreme Court judgment. I know because I was there.

I'd be grateful if this could continue on the forum now. There is a thread running in the general banking section.

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written by veester, February 05, 2010

This is well written.

Reg 5 however does fall right up my street as i have medical evidence of a mental illness which i tried to talk to the bank about, even provided evidence to - they chose to ignore it.

They even continued a variety of the activities listed above, so i have every intention of continuing.

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written by Hantslad, February 28, 2010

Regulation 5 was also something i used with success when, on two occasions the bank decided to allow my account to go overdrawn (i have no overdraft).
They said it was for me to keep an eye on my account and not to use the debit card if i had insufficient funds - which I agree with, but they should not allow a debit card to overdraw on the account if there are no funds. Its not a credit card!
So, having let it overdraw 'at the bank's discretion' they then charged me £35 per time for going overdrawn.
My argument was, by allowing the account to overdraw, when we had not agreed an overdraft, then charging me for it was in breach of Reg 5.
Sure enough they refunded both fees!

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