Bank Charges - An end is in sight
On 23 June 2009 the House of Lords started hearing the appeal by the banks in the bank charges case. They are fighting to avoid paying back billions (possibly as high as £9 billion) in unfair bank charges. Currently all claims are on hold, but City watchdog the Financial Services Authority is forcing banks to deal immediately with those in financial difficulty - they get some funds back with any balance on hold pending the outcome of the House of Lords' appeal.
What is interesting is how the internet and social networking led to these claims being made. It may well be the case that the whole bank charges saga can be laid at the door of a newspaper article by a barrister, Richard Colbey, some social networking and some template claim letters (now in a Wiki) showing the public what they needed to do to reclaim from the banks.
In September 2004 barrister Richard Colbey wrote an article in the Guardian newspaper about reclaiming bank charges for unauthorised overdrafts. You can find it here. Richard said:
It took some while for this information to be absorbed to the public, although what Richard was saying was normal thinking by most lawyers. A Guardian journalist called Charles Arthur wrote about it in his blog. Charles quoted from Richard's piece and ended by saying:"Last month I wrote in Jobs & Money about the late payment charges made by most credit card companies. These typically involve the levying of around £25 on the account of someone who pays a day late, even if this is caused by the company's late dispatch of the bill. Such charges are unlikely to be enforced by the courts: penalty clauses are legally void unless they reflect the loss the party enforcing them has suffered."
..."OK, so this is a rallying cry. Tell your friends. I'm starting today. No more penalty charge payments by me. "The story build slowly as more and more people wrote to their banks, in the light of the Richard Colbey's advice to reclaim unauthorised overdrafts fees and Charles' blog. The following year Charles Arthur successfully reclaimed his overdue credit card charges and wrote about it on his blog:
Then people started to get organised. Consumer groups starting telling their members how to do it. Full guidance was written up on various consumer sites - this is an example that has complete standard "fill in the gaps" legal letters to enable anyone to issue and progress their claim without having to employ a lawyer - they eliminated the need for one since it was a straightforward situation.
As a result thousands of people have already had their unauthorised overdraft fees repaid. Hundreds of millions have been refunded by the banks. And, with the situation snowballing, the matter has had to be turned into a test case in the courts - athough to many lawyers the law seems beyond real doubt. Last year there was an initial ruling on the case reported in the Guardian here with the Times Law Report here and the actual 119 page case report of Mr Justice Smith in April 2008 here. Whether the principles covered specific terms was dealt with by further judgements by Mr Justice Smith in October 2008 (to be found here) and February 2009 (to be found here).
With potentially £9 billion at stake the banks appealed - without success. The Court of Appeal took the unusual step of issuing a Press Notice where it said that it had dismissed the banks appeal and had refused them permission to appeal to the House of Lords. The Court of Appeal judgement (available here) and in the explanatory note which was read in open court (available here) are clear in their wholesale dismissal of the banks' case.
Now the House of Lords hearing and judgement is awaited. The decision could lead to price scrutiny of other financial services entailing charges that customers may not consider when agreeing a contract.
One of the complexities of the case has been that, because of the banking clearance system where it can take three days or longer for a sum paid in to reach a customer's account, it has never been able for a customer to micromanage his finances. Overdrawing can and does occur at times which could not reasonably be predicted by the customer and this is frequently because of failures by the bank. Banks and building societies frequently failed to post credit in a timely manner to their customers accounts - see here for a recent Times article on this point.