PENALTY CHARGES

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A businessman from Norfolk has recovered a record £35,987.94 from NatWest after accusing it of charging him unlawful overdraft fees. The man had challenged the fees that the bank had levied for bouncing cheques from his company. Marc Gander of the Consumer Action Group (CAG) said, "It is the biggest one I know of so far that has been successful." Over 28 months, from 2000 to 2002, he was being charged fees on his account almost every week, and at £30 a time, amounted to £2,000 to £3,000 a month.

Using standard letters from the website of the Consumer Action Group, he sent off a first demand in January this year for £24,000 plus £12,000 interest. With no response he then started a legal action using the government's Money Claim Online service. A case conference had been scheduled for 11 May but out of the blue a cheque arrived, in full settlement of the claim. A letter from NatWest solicitors, Cobbett's of Manchester, said, "Our client considers that your challenge to its charges would fail in court."

But after saying that the charges were fair, reasonable and transparent, the bank's solicitors threw in the towel. It continued, "Our client does not believe that your claim has any prospect of succeeding. Although our client is confident that it will be successful at a final hearing, its legal fees will almost certainly outweigh the value of the claim. As such our client must take a commercial approach to such claims. Without admission of liability our client is prepared to settle this matter in full to prevent incurring any further legal fees."

Marc Gander of the CAG commented, "The general message is that the banks are paying out substantial sums to avoid going to court. This idea the banks are not finding it economically viable to contest the case is just not credible." (Source: BBC News, Apr/07)

The Alliance & Leicester bank has apologised for a letter sent to customers who are trying to reclaim overdraft charges. The letter cited the favourable court ruling for Lloyds TSB in which that bank won a judgement in Birmingham county court. The A&L also hinted that it might have to close the account of one customer if he did not accept an offer of £66. Such a move could be against industry rules about treating customers fairly. The letter has been sent out to some customers by the A&L's legal firm, Wragge and Co. In it, the bank's lawyers claim the Birmingham ruling in favour of Lloyds TSB was a precedent, although it also admitted that the ruling was not binding.

The letter said, "It may be relevant to you....to consider also the decision which has recently been reached in Birmingham County Court on the first of the 'bank charges claims' to come before the court on an adjudicated basis. We are aware that the decision is not necessarily binding at first instance on other Judges in other courts around the country. That said, this case is a precedent and our client will rely upon it in the course of these proceedings."

One man who received the letter, John Smith from Leicester, said he thought it was an attempt to put him off pursuing his claim for £3,000. The letter he received referred to the possibility of his account being closed if he did not accept A&L's offer of a £66 settlement. It stated, "We would like to reassure you that if you do accept our offer of settlement we will continue to operate your account," it said. "We would only do so on the basis that you accept the terms and conditions of your account previously notified to you and that charges will be applied in accordance with our current charging policy." (Source: BBC News, May/07)

Lloyds TSB, which has been accused of overcharging customers £300 million a year, has issued staff with guidelines on how to deal with complaints. In a 16-page training pack it instructs workers to:

* Reject first-time claims, even if they are legitimate.

* Offer a maximum payout of £750.

* Only offer immediate settlements to those who are "very ill", or dying.

* Not to refund or waive interest.

Lloyds TSB has been so inundated with claims for refunds that it has set up a special Recovery Centre at its offices in Andover, Hampshire, and has had to draft in agency workers to help its hundreds of "customer care" staff. A spokeswoman for Lloyds TSB said, "Clearly, as a large organisation we have a policy for handling complaints but this is purely a framework, and every case is handled on a case by case basis according to the individual circumstances." (Source: Daily Mail, Jul/07)

Millions of bank customers hoping to be refunded “unfair” bank overdraft charges were left disappointed as the Supreme Court ruled in favour of the banks. Seven high street banks and a building society have won the right to charge customers who use unauthorised overdrafts. The banks were appealing against an earlier ruling that charges for the overdrafts come under “unfair contract” rules and are therefore subject to regulation by the Office of Fair Trading (OFT).

But the Supreme Court accepted the banks’ argument that free banking on current accounts was only made possible by charging customers who went into an unarranged overdraft. The decision will come as a major blow to millions of customers whose refund claims may now be thrown out. Customers who go into unauthorised overdraft can be charged as much as £35 or more for a single bounced payment but campaigners claim the actual cost to the banks could be as little as £2.50.

Consumer group Which?, which led a campaign encouraging people to reclaim the charges, called the ruling a "bitter blow". Which? chief executive Peter Vicary-Smith said, “This is a bitter blow for the millions of people who have been patiently waiting to get their bank charges back. Not only does it give banks licence to charge what they like for unauthorised overdrafts, but it could have ramifications for other areas of personal finance. The banks now have no excuse for introducing other fee charges.”

The test case to decide the legal issues thrown up by the dispute was brought jointly by the OFT and Abbey, Barclays, Clydesdale, Halifax Bank of Scotland and Lloyds TSB, which are now part of the same group, HSBC, Royal Bank of Scotland Group and Nationwide Building Society. If they had lost the appeal, it would have paved the way for further hearings to establish whether the charges are fair and, if not, what a fair charge would be.

It was estimated that up to eight million people may have paid unauthorised overdraft charges since July 2001, but have not yet submitted a claim to get their money back. If the banks had lost the test case at the Supreme Court, it would have cost them £2.6 billion a year in lost revenue and could have led to their having to make refunds of up to £1 billion. Before refund claims were frozen, some banks had already paid out more than £559 million to customers who complained about “rip-off” overdraft charges.

Lord Phillips, President of the Supreme Court, said the charges were agreed by customers when they took out an account with the banks. He said that without the charges, the banks would not be able profitably to provide current account services without a fee. Lady Hale, giving her ruling, said, “The banks may not be the most popular institutions in the country at present, but that does not mean that their methods of charging for retail banking services are necessarily unfair when viewed as a whole.”

The British Bankers’ Association said, “The Supreme Court has confirmed that the banks’ unarranged overdraft charges are an important part of current account services which the banks provide to their customers and that the amount of those charges is not assessable for fairness. We recognise this issue has been of real concern to a large number of our customers and we are pleased that this decision now brings clarity for all parties. The banks will continue to work together with the OFT in connection with its on-going market study.”

For the Government, Sarah McCarthy Fry, Exchequer Secretary to the Treasury, said, “Consumers, who have been waiting a number of years, will be extremely disappointed with this outcome. It’s clear that in the past, banks were not thinking enough about their customers. That needs to change for the future. While the decision on past charges has not gone in favour of consumers, we are determined to ensure the system is made fairer in the future. The Government will work with the OFT and Financial Services Authority to reach a new framework for fairer bank charges going forward.” (Source:Daily Express, Nov/09)

Millions of bank customers have been given fresh hope over “unfair” charges. The fight for the refund of unauthorised overdraft fees was dealt a blow by a Supreme Court ruling that overturned previous judgments allowing the Office of Fair Trading to investigate the fairness of the charges. But financial expert Martin Lewis, founder of Money Saving Expert and Sunday Post columnist, has found a way to continue the battle. Now he’s teamed up with campaigning Scots solicitors to mount a fresh legal challenge.

They’ve seized on the fact Lord Phillips’ ruling focuses on only one part of the 1999 consumer contract regulations. That leaves the door open to continue the fight under other parts of the regulations. So court documents, or the refund letter, already submitted by customers seeking reimbursement need only be amended. Martin Lewis and solicitors from the Govan Law Centre in Glasgow have instructed top London financial barrister Ray Cox QC to draft what they hope will be a watertight template letter.

Martin said, “There are millions of cases on hold, and the OFT won’t be giving its view until December. Meanwhile the banks are already starting to apply to have cases kicked out of court. We hope to put the brakes on this by drafting amended documents which people reclaiming can submit to the court, based on the latest ruling. It will be interesting to see how the banks react to what we hope will be the Rolls-Royce of template letters, drafted by a QC who has many times led cases for the banks themselves.”

All new claims against banks have been on hold for two years while the OFT test case went through courts. Prior to that, the banks forked out more than £1 billion in refunds to customers claiming back unauthorised overdraft charges. Lawyer Mike Dailly (left) of the Govan Law Centre, said, “The banks would like us to think the Supreme Court decision means an end to the matter, but that’s not the case. We’re working with Martin Lewis on what may be the biggest rescue operation in recent consumer history, the unfair bank charge campaign is far from over."

He sadded, “We anticipate our barristers will have new draft documents available to download from campaigning websites within two weeks. The bank charges are hugely discriminatory and affect the most vulnerable. It’s the low paid, people who’ve been made unemployed or faced the break-up of a relationship who find themselves in financial hardship and who are most likely to be the victims.” Mr Dailly says the ruling applied only to Regulation Six of the Unfair Terms in Consumer Contract Regulations, which deals with the fairness of bank charges in terms of cost.

That means the fight can continue using Regulation Five, which looks at whether the charges unfairly discriminate against certain groups of customers. The template letters and legal advice should be available within the next two weeks via www.MoneySavingExpert.com They will be made available to other free campaigning sites. Banks rake in an estimated £2.6 billion a year from the charges. Some have begun writing to customers to persuade them to abandon their refund bids. (Source: Sunday Post, Nov/09)

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