Test Case Latest
OFT beats the Banks
Banks' Overdraft Charges Ruled Unfair
Apologies for not being able to forward an update earlier this week but the anticipated information from the OFT and FSA has not been made available. However, we have received information direct from the court where the hearing was held that provides a useful understanding as to this latest stage.
Court Hearing 7th – 9th July
The hearing was to establish whether bank charges applied by the banks historically (over the last 6 years or so) can be looked at by the OFT in relation to fairness and whether the charges can be viewed as penalty charges.
It was decided and agreed between the OFT and the Banks that all historic terms, as well as the present terms, are subject to assessment of fairness. So this part should be just a rubber stamping exercise. We do at least know there are some terms which the OFT still consider are capable of amounting to penalties under common law. So there is a very good chance that the terms that the OFT have identified have a good chance of actually being accepted by the Judge. A judgment on those lines, would at least mean that some claims could be given the green light to proceed and a ruling of this nature would put incredible pressure on the banks to resolve the claims.
The Judge has indicated his intention to make a declaration on historical fees and their applicability under the UTCCR fairness principles as well as the penalty charges aspects. He expects this declaration to be made as soon as possible but is likely to be after the OFT releases its report on the fairness of bank charges at the end of July. The reason for the delay in releasing his judgment is so that he can address fully all the aspects of the ruling to avoid the banks delaying the process in the future by way of legal loopholes.
It does appear from what was said in court that the Terms in the bank contracts will apply to historic terms across the board, and it also appeared the Judge was in agreement with the OFT over those penalty charge clauses in historic terms that were submitted.
Although the judge has yet to give directions, it appears that the OFT will be reporting to the judge by way of letter on 24th and 25th July as to the position at that time regarding the details of the report which is awaited. The biggest concern for the judge seemed to be that the OFT and the banks would reach some form of agreement as to a fair level and/or structure of charging and would therefore discontinue the current litigation.
He also showed his deep concern at still not being in a position to give the go ahead to proceed with claims cases. He was particularly concerned with claimants who were ''desperate'' for a refund. The OFT ruling on fairness appears to be holding this up, but is to now be addressed at the end of the month.
The pressure the judge is putting on the banks and OFT to complete the legal process without delay will not have gone unnoticed by the banks legal teams who will no doubt be reporting to their respective clients. They will no doubt also be uncomfortable by the suggestions and attitude towards the banks evidence in this case where the judge is of the opinion the OFT could ask for an injunction against the banks to suspend all charges when their report is published.
He even suggested that - in the unlikely event the OFT rule the charges fair - a handful of cases could be used as test cases if consumers don't agree! This is not good news for the banks as he is clearly stating that regardless of the OFT’s findings the case will continue.
Indeed when a highly respected High Court judge starts to make fun of the defendants they must in turn be asking themselves serious questions of how long they can continue defending this action. The HSBC QC was going through a customer scenario of charges when it became apparent to the judge that one charge amounted to £48. The judge said ''£48? That's the highest one we've had so far!'' smiling to himself and shaking his head in disbelief while viewing the bank's legal teams for a response! No response was heard.
The delay in the process is incredibly frustrating but the most important issue is that the right decision is reached. With the ruling to date and attitude of the judge and what appears to be a damning report which is due from the OFT regarding the banks, we will achieve the right conclusion. We are in contact with the banks daily to ascertain their current stance regarding claims which now could settle at any time.
For more information on the Office of Fair Trading statement click here
For more information on the Financial Services statement click here
For more information on the Ombudsman statement click here
