After a rethink and having come through a pessimistic period about bank charges, it seems that there may well be a chance of recovering historical bank charges more easliy than I had first imagined.
In line with my other article, Bank charges - where to now, it is necessary to prove some unfairness. But it has occurred to me that probably most of the banks have misrepresented their charges in some way.
Certainly none of the banks have ever admitted before that they earn 30% of their current account revenue from bank charges and that this revenue is used to cross-subsidise "free-banking" for others.
However, the banks did make this admission in the Supreme Court. The Supreme Court accepted this and it was for this reason that the banks won their case.
However, it may be possible to turn the tables. It is the fact of this Supreme Court admission which finally and definitively gives the lie to all of the banks' earlier justifications that their charges were reasonable or that they merely represented their administrative costs.
The banks cannot go back on this admission. To do so would be to admit perjury.
They may now be required to be obliged to explain why they they didn't tell this truth to their customers in the first place.
Got questions? -- Here are the FAQs
Q. Can I still reclaim my bank charges?
A. Yes you may well still be able to
Q. What about the decision in the OFT test case?
A. The Supreme Court test case was a big surprise and a disappointment. No one really expected that we would lose.
Q. What were the reasons for the Test Case defeat?
A. The banks managed to narrow down the case to the question of whether the fairness of their charges mattered at all. This means that whether they could be challenged under reg.6 of UTCCR 1999 for fairness.
Reg.6 only applies to charges if they are not part of the banks’ core business plan.
Up to the test case, all the banks had tried to convince their customers either that their charges reflected the true cost of dealing with Overlimit Episodes – or else that anyway their charges were reasonable – meaning that even though they made a profit, the margin of profit was reasonable, proportionate and not excessive.
Q. But no one ever believed that their charges were reasonable did they?
A. No. No one believed it but it was the only way that the banks could convince their customers to accept their bank charges without a lot of fuss.
Q. So what happened in the OFT test case?
A. In the OFT test case, the banks abandoned this justification for their charges. In their arguments to the Supreme Court, the banks came right out and admitted that they do make huge profits from charges. In fact they went further. They admitted to the Court that Overlimit charges earn the banks about 30% of their current account revenue.
Q. That is an astonishing admission. Why did they do it?
A. It is astonishing. But that is the clever part. They told the court that because they earn such a huge amount from Overlimit charges, that they depended on the money and that because it represented such a huge percentage of their total revenue, it was actually now part of their core business and that therefore, it didn’t matter if the charges were unfair, they were free to charge what they like.
Q. And the Supreme Court bought it?
A. Hook, line and sinker.
Q. It is obscene. Didn’t the Supreme Court say anything about it?
A. Yes, it is obscene. It is more obscene than you realise because basically the banks now have the thumbs up to plan the success of their business based upon the poverty and the “account mismanagement” of their customers. The worse off you are, the better the banks do.
This is really a new development in business planning and banking practice. Historically, businesses plan to succeed if their customers succeed. But not any more.
Q. But sure this must be against the public interest?
A. Yes it is. But then the Banks have really removed themselves from our society. We need them but they demand the human sacrifice of many of their customers in return.
Q. This is rather like the parasite which eventually destroys its host's body.
A. That is a pretty good analogy.
Q. So is that the end of the matter?
A. Just after the Supreme Court decision, we thought that it was the end of the matter. However after reading the judgment, we found that the Supreme Court Judges were very keen to emphasise that their decision was on a very narrow point:- whether it mattered or not that charges were unfair.
The Supreme Court went on to say that this did not close the door to claims and that they might still be open to challenge under reg.5.
It was quite an unusual thing for a Supreme Court to offer such a suggestion as to an alternative route and it seems now that the Supreme Court may even have been offering a form of encouragement not to give up.
Q. So what does regulation 5 of UTCCR say?
A. Well to find out what it actually says, you can Google it and read the actual regulation. But what it means is that if you can show that the bank is in a dominant position in relation to you because they impose standard terms and conditions on you. And if you can show that the bank has used their dominance to force contractual conditions on you then you can challenge the term because of the unfair way that it has been imposed upon you.
Q. I don’t quite understand. How does reg. 5 differ from reg. 6 which we were defeated on?
A. If we had won under reg.6, we could have challenged bank charges directly because they are unfairly high.
We can’t do that now because that the Supreme Court said that because they are core business, their unfairness is irrelevant.
You can challenge under reg.5 if you can say that you only paid the charges because the bank acted unfairly in the way they made you pay them. In fact the fairness of the charges is now irrelevant
A. Absolutely right. Any unfair treatment of you as a customer by the bank can invalidate any contractual term which they are trying to enforce by unfair means.
Q. So what kind of unfair treatment of me might invalidate the banks’ charges?
A. Well the kind of treatment which springs immediately to mind is if the bank has misrepresented their charges to you. In other words they have claimed that they were something which they were not and this had the effect of making you accept them with very little fuss.
The banks have never admitted this to their customers. In fact they always told their customers that their charges were fair, or reasonable, or that the charges reflected their actual losses in dealing with your bounced direct debits etc.
We always knew that this was untrue. Now the banks have openly admitted the truth about their charges.
They have told one story to the Supreme Court and a different story to their customers. It is not possible that these two stories can each be true.
Q. So which story is the porkie?
A. Don’t be silly!
Q. So what should I be looking for?
A. We already have quite a few examples:-
Abbey Bank has routinely told their customers that their charges reflect their administrative charges. They have said this in their terms and conditions and in correspondence to people who have queried them. They have even sent out letter saying that they do not accept that their charges exceed the costs of dealing with Overlimit Episodes.
Poor old Abbey. Not a single penny of profit from their bank charges. How that squares with their story to the Supreme Court that they make so much money from their charges that handling overlimits and failed direct debits etc is part of their core banking business, I really don’t know.
We’ll have to leave it to a County Court Judge to see what he can make of it.
The Yorkshire and Clydesdale banks have also told their customers that their charges represent their costs.
In fact these two banks have gone one better. They have even stated on their court documents – signed as statements of truth that their charges cover their costs.
They have gone even better than this. They have even filed counterclaims – signed as statements of truth, of course – suing their customers for their charges – on the basis that their charges equal their costs.
You can have fun reconciling this story with the story that has been given to the Supreme Court that their charges produce 30% of their current account revenue.
And don’t forget the we had that very helpful ex-Yorkshire Bank employee Whistleblower who appeared on a BBC documentary and gave direct evidence that the cost of processing an Overlimit episode manually cost no more than £2.00 at the outside.
If you can’t reconcile the story, then why don’t you ask a County Court judge to do so.
Lloyds Bank has always told its customers that it believes that its charges are “fair and reasonable”.
What does this mean? If it means that it is fair and reasonable to levy them, then it seems that the Supreme Court’s decision means that they are probably right.
But if they mean that the level of their charges is fair and reasonable – meaning not excessive or disproportionate and that they represented a fair and reasonable return for the extra work they have been put to handle your Overlimit episodes then this probably misrepresents the position and is unfair.
Of course if Lloyds are challenged on this point, they will probably argue that they meant the former. However, don't forget that we have a letter written by a very senior member of Lloyds staff in which he is very clear that they meant the latter.
If you decide to challenge Lloyds then you will have to argue that the latter meaning – that the charges were at a reasonable level. You will have to convince the judge that your meaning is the more natural meaning of the words and that is how most people understood the words and that this is how the words were meant to be taken.
We have a letter from Lloyds in which they go to some lengths to explain how the bulk of the charge is made up of their costs and the rest or the charges merely represents a fair return.
Lloyds may find themselves in court having to convince a judge how a bank charge which is big enough to fund free banking for others and to provide 30% of current account revenue can really be fair and reasonable to the individual customer.
A. If you have Terms & Conditions from any bank or correspondence from any bank or court documents filed by any bank in which they have tried to justify their charges by claiming that they are set at a fair level because they reflect their administrative costs or because they permit a reasonable level of return then we would like to receive a scanned copy – without the identifiers removed. We will never reveal your identity to anyone but we need to see it untouched.
We are sure that the necessary documents do exist because all of the banks have followed the same line in trying to defend their bank charges.
If you have this kind of document then you should consider suing your bank in the County Court on the basis that they abused their dominant position by misrepresenting their charges to you contrary to the requirements of good faith and that you suffered detriment because you agreed to pay them and this caused you detriment.
Q. Can I reclaim bank charges which have been taken since the OFT test case?
A. It depends on whether the banks have continued to misrepresent their charges. If you can find current evidence that the banks are still trying to hide what their charges are really about then yes, you may be able to reclaim them.
DO NOT CONSIDER GOING TO THE OMBUDSMAN. IT TAKES TOO LONG AND IS A WASTE OF YOUR TIME.
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