The Latest In The Bank Charges Case

We review the latest ruling on bank charges and consider what happens next.

The Office of Fair Trading exists to ensure that markets work well for the consumer. That is, markets such as the current-account market. To that end it's been up against eight banking groups in court over penalty bank charges.

It's been fighting on two fronts, by quoting both common law and the Unfair Terms in Consumer Contracts Regulations 1999.

Common law

Common law is the part of law that isn't made by Parliament, but rather it's made by judges. Where there is nothing from Parliament about how a judge should handle a case, the judge can make the law by either setting a precedent or by referring to previous precedents set by other judges.

Unfair Terms in Consumer Contracts Regulations 1999

The alternative to common law is legislation from Parliament, which comes in the form of Acts or Regulations. In the bank-charges case, the relevant legislation is what we call in shorthand the UTCCRs.

The OFT has not been asking the judge to say if bank charges are penalties. It's been asking the judge to rule whether they might be considered penalties. If they are, the OFT will want to assess the charges itself and use its own powers on the banks. What it isn't asking the judge for is to make a ruling itself on charges.

By the end of last year and through a few rulings, the judge had said the OFT is allowed to assess the bank charges for fairness using the UTCCRs, but not under common law. Overall, that is a good judgment for penalised customers. You can read more about this, and my opinion, in my last article: It's 2-2 In The Bank Charges Case.

The new bit

At the end of January 2009 we received another judgment in the ongoing case. It's getting easier to read through the judge's decisions as I get used to his style, and not least because they, thankfully, are getting shorter every time. This latest one is just ten pages. Hopefully the last judgment will be just a footnote along the lines of `I accept all these points as far as they go, but I conclude that the OFT wins.'

This January decision is a small win for some claimants: the judge decided to make one exception to his ruling on common law. He said that one clause in NatWest's 2001 conditions is capable of being a penalty. The relevant term the judge referred to was this:

You must not use your Card to go overdrawn on your Account unless we have previously agreed this with you.

Therefore any NatWest customers who had penalties through use of their bank cards whilst the 2001 T&Cs were in effect could make a claim under common law. Remember that the judge has not said they are penalties under common law, only that they could be.

2001 is now before the six-year limit in which you're normally allowed to make claims, so hopefully you took my advice at the beginning of this case by registering your claims in court in order to lock in the time period.

Even so, I think you'd be unlucky if this limitation period causes you problems, as there are exceptions to it, and many judges might agree that this counts as one. Furthermore, one condition of the FSA's waiver (more on this in a second) is that, if the banks lose, they're not allowed to fight claims on the basis they've recently expired. However, whether the FSA can enforce that condition remains to be seen.

When can we start reclaiming charges?

Whether you're with NatWest or anyone else, you still can't put in a claim to the county courts unless you can show you have serious financial difficulties. This is because the FSA's waiver will remain in place. The FSA has ignored the consumer again and extended it for another six months. It was due to end on 26 January 2009.

The waiver means that banks don't have to deal with complaints or claims beyond a brief note saying they've received it. The FSA has also encouraged local courts to stop dealing with claims, and it's ordered its sub-department, the Financial Ombudsman Service, to stop dealing with customer complaints too.

It's likely that the waiver will be extended once again in another six months, meaning that all our possible legal routes to a fair hearing remain blocked. With millions of claimants and the average claim being £1,000, that's a lot justice that we're unable to get on an individual basis. The FSA is not achieving its goals of `Helping customers get a fair deal' or of `promoting fair markets'. How can it be fair, when it has stripped away for years all of our legal recourses?

Now what?

NatWest could still appeal the common-law decision, and the banks will fight the judge's judgment on UTCCRs to the bitter end through an appeal hearing and then in the House of Lords if necessary. The end of this is no way near in sight.

The banks' barristers are bogging the judge down in minutiae, getting him to analyse phrasing in the contracts, but the wording is not important. What is important is the effect. Just because the banks have said these charges are penalties and are saying they are costs for a service doesn't mean that this is what they have become. And it doesn't mean that's what they were all along.

I hope that, at the end of this, the OFT is able to rule on the UTCCRs and that it too doesn't get so bogged down in wordplay as the courts are.

NatWest 2001 customers

I want to know when NatWest's 2001 T&Cs were effective. Perhaps you could help me. If you're a NatWest customer, and are particularly organised with your paperwork, I'd be grateful if you got in touch to tell me what date the 2001 conditions came into effect, and what date they were superseded by new ones.*

In the meantime, I'll see what records the Office of Fair Trading has...

> Compare current accounts. They've all got penalties, but some of them are less penal than others.

* You can contact me via my editor, Ed Bowsher. You can see his email address on this page.