“Banks pay out £560m for unfair fee claims” The Financial Times, 6 March 2008.

Abbey National Plc, Barclays Bank Plc, Clydesdale Bank Plc, HBOS Plc, HSBC Bank Plc, Lloyds TSB Bank Plc, Nationwide Building Society and Royal Bank of Scotland Group Plc.

“Calculating fair default charges in credit card contracts – A statement of the OFT’s position”, April 2006.

These charges are applied for failure to pay on the due date, exceeding a credit limit and failure to honour a payment made.

Staff costs, premises, telephone, letters and postage, IT systems, depreciation of assets related to running collection systems pre default notice, IT support and other central services such as human resources

“Court battle on overdraft fees begins” Daily Mail, 18 January 2008.

“Calculating fair default charges in credit card contracts – A statement of the OFT’s position” April 2006, paragraph 1.1.

See www.oft.gov.uk/news/press/2007/54-07.

In November 2007, the OFT decided to delay the publication of its study until after the Test Case has been resolved.

“Court battle on overdraft fees begins”, Daily Mail, 18 January 2008.

http://www.fsa.gov.uk/pages/Doing/Regulated/Notify/Waiver/pdf/direction_disp.pdfBank Charges

On 24 August 2007, in a claim brought by Nadine Fry against Barclays Bank at Luton County Court,  His Hon. Judge Abraham ordered Barclays to stop applying further charges to Ms Fry’s current account until resolution of the Test Case.

SI 1999/2083

The Banks seek declarations that their current account terms and conditions (i) are in plain, intelligible language, (ii) relate to the definition of the main subject matter of the contract, (iii) provide for payment of remuneration for services supplied by the Banks in exchange, rather than the payment of a sum by the customer for breach of a contractual duty owed to the Banks, (iv) are excluded from assessment for fairness under the UTCCR by reason of regulations 6(2)(a) and (b), and (v) by reason of (iii) above are not capable of amounting to a penalty at common law.  In the alternative, the Banks seek a declaration that if the relevant terms and/or the relevant charges are subject to an assessment for fairness, it be a precondition to a finding of unfairness for the term or charge to be shown to be contrary to the requirement of “good faith”.  For the meaning of good faith, see regulation 5(1), which provides that a bank must, during the making/agreeing of a contract, deal fairly and openly with its customers.

The classic statement of the rule on penalty was made by Lord Dunedin in Dunlop Pneumatic Tyre Co Ltd v. New Garage and Motor Co Ltd. [1915] AC 79.

Under regulation 12 of the UTCCR.

Under section 217 of the Enterprise Act 2002.

The OFT's Joint Reply & Defence to Counterclaim, paragraph 5

In the alternative, the OFT submits that such acts as the banks perform prior to a refusal to carry out an instruction for payment or withdrawal and/or refusal itself and/or any related action that the bank may take following such refusal (i) are not a benefit that the customer receives or enjoys, and/or (ii) are of no appreciable value to the customer, and/or (iii) are performed for the benefit of the bank not the customer. 

The OFT submits that the relevant terms (i) are not clear and/or transparent; and/or (ii) do not provide the consumer with a fair opportunity to understand how they will apply; and/or (iii) are liable to mislead the consumer.

Although the submissions made by the Banks are similar, the Defence & Counterclaim of Abbey National Plc has been used for the analysis in this section

Export Credits Guarantee Dept v. Universal Oil Products Co [1983] 2 All ER 205

Acceptance of cash deposits and cheque deposits; setting up, amending or cancelling standing orders, bill payments, direct debits; agreeing a new advance overdraft; renewing an existing advance overdraft; amending an existing advance overdraft limit; use of cash machines; stopping payment of a cheque; cheque payments; debit card payments; cash withdrawals; direct debit, standing orders and other automated payments

Test Case, Day 6

Coventry County Court, 26 June 2007

[2007] EW Mis 1

Mayor's and City of London Court, 30 July 2007 (judgment of His Hon Judge Simpson). 

Tom Brennan sought a declaration that bank charges for exceeding overdraft limits are unlawful and are not binding on any customer, an account of the profits made by the bank in respect of the sums paid by him and later refunded, aggravated damages and exemplary damages.

Agreement between the OFT, FSA and the Banks dated 25 July 2007, paragraph 4.1

‘Banks pay out £560m for unfair fee claims’, The Financial Times, 6 March 2008.

‘Bank charges court case may not benefit majority’, Banking Times, 14 January 2008.