While every effort’s been made to ensure this article’s accuracy, it isn’t intended to be seen as legal advice and no liability can be accepted for any claimants who rely upon the information given.
Bank charges news changes constantly. Martin's free weekly MoneySaving e-mail contains all updates. |
On Thurs 24 April 2008, a High Court judge confirmed what campaigners had been arguing for two years: that consumer contract regulations do apply to bank charges, so can be 'unfair'. Now it’s for the Office of Fair Trading (OFT) to assess whether it believes they are actually unfair, but as it's the one who took the banks to court, that seems likely.
For free template letters: See the full step-by-step Bank Charges Reclaiming guide.
This has been, perhaps, the biggest consumer revolution since the poll tax riots, yet this has been fought from armchairs. This timeline shows the incredible rise of bank charges reclaiming...
LATE 05. The first campaigners won bank charges reclaims
JAN 06. They contacted this site and the first MoneySavingExpert.com reclaiming guide was published
MAR 06. The first newspaper column on reclaiming was published
MAY 06. The first TV programme dedicated to reclaiming bank charges (ITV1 Tonight) was broadcast
LATE 06. Increased publicity meant the scale of reclaiming grew exponentially
FEB 07. Bank charges reclaiming became front page news due to its sheer scale
FEB 07. The millionth bank charge reclaiming template letter was downloaded from this site
MAR 07. The two millionth bank charge reclaiming template letter was downloaded from this site
MAY 07. The three millionth bank charge reclaiming template letter was downloaded from this site
JUL 07. The banks agreed to a test case with the OFT, to decide the underlying principles
JUL 07. The Financial Services Authority announced bank charges reclaiming was being put on hold
JUL 07. By this stage, 3.8m template letters had been downloaded from this site
JUL 07. The test case hearing started
24 Apr 08. Test Case Result Announced
The result was handed down just ten weeks after the final evidence in the hearing. The test case was to assess legal principle, not an individual claim. It centered around two points: whether bank charges fall under unfair contractual terms laws and if they can be considered penalties.
22 May 08. Case Management Conference
At this point both, parties will reconvene to discuss whether either wants to appeal, and how to proceed.
Q. What was the decision of the hearing?
A. The High Court judge, Mr Justice Andrew Smith, confirmed what bank charges campaigners have been arguing for two years, that consumer contract regulations, known as ‘Unfair Terms in Consumer Contracts Regulations’ do apply to bank charges, meaning 'fairness' counts.
While it's not the end of the line, it's a massive step and paves the way for the OFT to decide whether it thinks banks' charges are unfair.
In the second part of the judgment, to decide if charges are fines disguised as a service, and therefore are penalties, the judge decided in favour of the banks. While, for reclaimers, it would’ve been great if this was decided in their favour too, this was always a two pronged attack, with unfair contractual terms being of primary importance.
The judge also decided that the banks current terms and conditions were in, or largely in, plain intelligible language. Again, this could have been an additional plus if he’d decided they were not clear, yet it’s equally not too much of a loss that he didn’t.
Q. Where can I see the judgement?
A. The full 450 paragraph judgement is on the Judiciary.gov website. The following is the conclusion:
449. As for the position at common law, I accept the banks’ submission that none of the terms which I have considered (the terms now generally used by the banks for personal current accounts other than basic accounts and also certain of the terms used until recently by Clydesdale and RBSG) could be unenforceable on the grounds that they are penal (paragraph 323 above).
450. With regard to the 1999 Regulations, I conclude that, of the terms now generally used by the banks for personal current accounts (other than basic accounts), those of HSBC, Lloyds TSB, Nationwide and RBSG are in plain intelligible language, and those of Abbey, Barclays, Clydesdale and HBOS are largely in plain intelligible language but not so in certain specific and relatively minor respects (paragraph 293 above). However, I reject the banks’ contention that the Relevant Terms are exempt from assessment as to fairness under Regulation 6(2) of the 1999 Regulations (paragraph 421 above). This does not mean that the Relevant Terms are necessarily to be regarded as unfair under Regulation 5(1) or that they are not binding upon consumers under Regulation 8(1): those are not questions for me to decide in this judgment. For the reasons that I have explained, I decline to make any declaration as to the meaning and effect of the requirement of good faith in Regulation 5(1) of the 1999 Regulations (paragraph 448 above).
Q. What will the OFT do now?
A. The next step is for the banks and the OFT to review the whole judgment and for the OFT to assess whether it thinks bank charges are actually unfair, but as it's the one who took the banks to court, that seems likely.
If it does believe the charges are unfair, it will then try and seek an agreement with the banks. If that doesn’t work, it needs to go back to court to prove the charges are unfair.
Q. Can the banks appeal the court’s decision?
A. Yes. All parties will get together at a special ‘case management’ meeting on the 22 May, to say what they intend to do; appeal, pursue or come to an agreement. If the banks do appeal, this would hugely delay the whole case, as this just the first stage. Many have called on the banks to accept the judgment for the sake of clarity.
The banks have already said they believe their charges are fair and they would win if the case is taken further. Yet to assess fairness. the banks will need to supply their internal costs, something that, until now they’ve refused to do as they don’t want their confidential commercial undertakings being made available to all.
Q. What’s the next key date?
A. After the meeting on the 22 May, we will know more, and an exact timetable should be put in place. Full details on the result, and what to do will be in the weekly email.
Q. What will happen to the hold on reclaiming?
A. When the test case was announced, the regulator, the FSA, also put a hold on all reclaiming. This meant neither banks nor the Ombudsman had to deal with claims. It also requested that the courts put all cases on hold.
The FSA has said it will not be changing the waiver until the test case is resolved, although it is constantly monitoring the situation, so all cases will remain on hold for the moment.
My view is that pressure must be put for the hold to be lifted on the 22 May. The FSA argued that the hold was put in place to 'protect consumers' from inconsistencies. Something most campaigners rejected.
Now that the law is clear and binding, hopefully pressure will be put to allow people to try to reclaim again. After all, the banks are still charging these charges.
Q. If it's still on hold, why put in a reclaim now?
A. It’s important to get a marker in as soon as possible, and there are three distinct reasons for this…
i. Get in the queue
It’s estimated there are already over 750,000 with cases on hold, so when the floodgates do open, the further ahead you are in the queue, the sooner your claim will be processed.
ii. Things change
The law is a strange thing. At the moment there is a precedent binding on lower courts that ‘bank charges are covered by unfair contractual terms rules’. That is not under any doubt. Yet it is possible the banks could put in an appeal, and while its unlikely, there is always a chance the Court of Appeal could overturn this (and subsequently the House of Lords and even European Court could then overturn that).
Yet the fact appeals could change the law doesn’t impact what the law is right now. So hopefully, the hold will be lifted soon, and people may be able to try to reclaim again. Therefore, simply because there’s a tiny chance things may change, and the decision is currently in reclaimers favour…. get your claim in now.
iii. Claim back as far as possible
The statute of limitations says you can only make a court claim for six years' worth of charges in England, Wales and Northern Ireland, five in Scotland. Therefore, on the surface there’s a worry that if you don’t get your marker in sooner, and you’ve got old charges to reclaim, you will miss the opportunity.
Yet the regulator, the FSA, has said it ‘stopped the clock’ on 27 April 2007, when it first put the hold on reclaiming and that this has frozen any ‘time bars’. This doesn’t have any power in the court, but the banks have agreed not to complain about time limits if a case goes to court, and judges in England, Wales or Northern Ireland shouldn’t consider the issue unless the banks request it (it’s slightly different in Scotland as judges there can consider time issues themselves).
Yet as this situation has never happened before, we do not know how it will pan out in court. As such, while hopefully things will run smoothly and this won’t be an issue, for belt and braces safety, assume the clock is still ticking.
Plus a final note from me. If you’re reading this now, you’re interested in the issue and feeling in the mood to act, often with anything to do with money, apathy can play a part, so to throw in an old cliché… strike when the iron’s hot… and while you’re in the mood!
To put your claim in read the step-by-step Bank Charges Reclaiming guide, including free template letters.
Q. How do I keep up to date with what’s happening?
A. If you are involved in reclaiming or considering it, get the free weekly MoneySaving email, so I can let you know of any changes.
Q: Can I/should I start reclaiming now?
A: Yes. You can only reclaim the last six years worth of charges (five in Scotland) due to what’s called the ‘statute of limitations’. Technically the date this starts is when you submit a claim to court, though in this unprecedented situation it's possible things will work slightly differently.
Therefore, if your charges are more than five years old, you should send in your claim to your bank immediately. If you have a large number of charges that are between five and six years old, you may also want to be very safe and put in a claim to the small claims court immediately too, though there is always a risk of losing the court fee. Full details on claiming are in the main
Bank Charges Reclaiming guide.
The FSA has said that on the date it announced the waiver, 27 July 07, it 'stopped the clock', so the time out issue won't arise, yet it does not have power over the courts, so for safety it's best to assume the clock's still ticking.
If your charges are within the last few years, you could safely wait until the test case has ended. However as a general rule, the sooner you can get your claim in the better, especially with the huge queue of claims that's building up. Claims sent to the bank now will be recorded and acknowledged within five days. Your bank will also need to keep you updated on developments in the test case process and deal with your complaint as quickly as possible once the test case has been concluded.
Q. Can I still start a court case?
A: While there’s no problem actually submitting a court claim, the question is: when will it be heard?
The government's Moneyclaim website decided to automatically stay (suspend) all cases submitted online after 13 August 07, where the defendant (the bank) files a defence. Of course the banks are therefore putting in defences and thus they're all put on hold.
This means all new cases started online are very unlikely to be heard until the FSA's stay on cases is over. See the financial difficulties question to see if you maybe able to bypass the hold.
This means the main option that's open is to start a claim in your local county court, rather than online. Although some county courts are also putting claims on hold, others are continuing to process applications. Check with your local court what they are doing.
Yet delay and you may fall foul of the six year statute of limitations (i.e. claims can only go back six years, so you may not be able to reclaim some older charges). If you have charges going back this far, you should put your claim in as soon as possible, either online or at your local court. Although your case will not be heard for a while, it means you won’t miss out on the older charges.
Sadly to put a claim into court will usually involve a small fee (usually substantially under £100) and once this has been paid you cannot stop your claim and ask for the money back. Also, if you put a claim in now and there were to be an appeal overturning the test case, you may find that you have paid for a case you won’t win. However in most cases the amount you stand to gain will be more than the fee.
To put a court claim in, see the Bank Charges Reclaiming guide for info and template letters.
Q: Will they still give me details of all my past bank charges if I ask?
A: Yes. All banks are still obliged to give you this information under the Data Protection Act, so you can still write to ask for details of your charges if you don't have the information. See the main Bank Charges Reclaiming guide for how.
Q: What should I do if I have only recently received my first one or two bank charges?
A: Most banks will usually give you one or two ‘free hits’. In other words call up, and politely request the money back. Most times they’ll agree and you won’t have to go through the whole reclaiming procedure.
Q. How do I keep up to date with what’s happening?
A. If you are involved in reclaiming or considering it, get the free weekly MoneySaving email, so I can let you know of any changes.
A: If you have sent a letter to your bank, unless you are having financial difficulties, your case will be suspended until the test case has finished. Your bank should write to let you know what will happen.
If you are not happy to wait until the test case has ended, you can still start a court claim. See the court claims section for more details, and although this could also be suspended, there’s a small chance your local county court will let your claim though.
Q: My bank says my credit card claim is also on hold, what should I do?
A: This is not true. The FSA waiver does not apply to credit cards charges, so you can complain about credit card fees now. Read the Credit Card Reclaiming guide for full details on what to do next.
Q: What should I do if my bank has responded but has not offered any money?
A: If you're not happy with your bank's response, you can still take your complaint to the Financial Ombudsman Service, but it will put your claim on hold until the test case has been decided. You can also still start a court claim, see the court section for more details.
Q. What will happen to claims with the Financial Ombudsman Service?
A. The Financial Ombudsman Service has decided, for the time being, not to continue its work on complaints about bank charges. All cases will be restarted once the test case has been decided.
Q. What will happen to claims put to the county courts?
A. The courts may continue to handle bank charges cases that were submitted before the test case announcement or online before 13 August 2007, as usual. Unless, one of the two parties involved, in other words the reclaimer or the banks, applies for a stay. However it's almost certain that every bank will apply for a stay, asking that the case isn’t heard until after the final decision.
Yet that doesn't mean the case will then be put on hold; you have a right to object to the stay and argue it should be heard now. There are a variety of reasons that can apply. The most obvious is that by waiting you would be left in undue financial hardship.
Individual judges are likely to react differently to such objections to stays. I’ve no doubt some will allow cases to be heard, while others won’t. It’s likely to be luck of the draw. If your case is heard, the banks may well decide to settle beforehand, so as not to rock the boat before the main test case (where they’ll collectively have their huge legal big hitters).
Sadly, arguing against a stay won’t necessarily be easy, and probably shouldn’t be attempted without detailed research, preparation and an understanding of the court process. Therefore, for most people, the stay will have an impact and your case will be on hold until after the test case.
The win on the 24 Apr does not change this position as yet. Until the FSA ends the waiver, and my hope is that this should happen in the next couple of months, sadly you’ll just have to keep twiddling your thumbs.
Q: I already have a court date do I need to attend?
A: Yes. If you have a court date, do make sure you go along to represent your complaint, even if your bank has written to tell you that it has requested your case be stayed. Only the judge can decide if a case is stayed; yours may not be, but if you do not attend the judge will almost definitely 'strike out' your claim, meaning you will need to appeal in order to continue.
Q: I have already won a court case but have not received the money yet. Will I still get it?
A: Yes. Your bank will pay you any money that has already been agreed. If it does not pay, you still have the right to send the bailiffs in to claim the money, the stay on reclaiming doesn’t impact that. See full detail in the Bank Charges Reclaiming guide.
Q. How do I keep up to date with what’s happening?
A. If you are involved in reclaiming or considering it, get the free weekly MoneySaving email, so I can let you know of any changes.
Q. Does the test case affect all types of reclaiming?
A: No. This is very strictly only about reclaiming bank charges. All the other types are still on. Read the full guides to reclaiming credit cards fees, loan insurance, endowments, mortgage exit fees and council tax.Q. Why did the OFT bring the test case?
A. The Office of Fair Trading announced it was bringing the case to decide the principles of reclaiming bank charges in the High Court using its special powers to have a case heard on legal principle.
Its aim was to gain clarity on whether bank charges for unauthorised overdrafts (which includes bounced cheques or direct debits) are lawful or not. The banks that are party to the case are: Abbey National plc, Barclays Bank plc, Clydesdale Bank plc, HBOS plc (includes Halifax and Bank of Scotland), HSBC Bank plc, Lloyds TSB Bank plc, Royal Bank of Scotland Group plc (includes Natwest) and Nationwide Building Society.
Prior to this, over a million people had had reclaimed charges (see success stories), as the banks had been unwilling to go to court and take an argument.
Q. What legal points is the case deciding?
A: The first stage of the case was to determine if the ‘Unfair Terms in Consumer Contracts Regulations’ (UTCCRs) can apply to bank charges and the verdict was that they can. Now this has been decided it's for the OFT to assess whether it thinks they are actually unfair, but as it's the one who took the banks to court, that seems likely. Then it'll try and reach agreement with the banks, and if not, go back to court.
Obviously there can’t really be a time frame on this, as it could go all the way to the House of Lords; if that happens, sadly this could take years!
It’s also worth noting the case is primarily about current bank charges. The OFT doesn't have powers to look at charges retrospectively, which is after all what bank charge reclaiming is all about.
However it will have a huge impact on reclaiming and in a meeting with the OFT, I strongly requested it consider that when things are settled it needs to incorporate past contract terms (see the Bank Charges Consumer Charter for more).
Q. What happens to reclaiming bank charges in the meantime?
A. The FSA gave banks a waiver from dealing with bank charge reclaiming cases until after the case, meaning they needn’t respond to complaints in the meantime. At the same time the Financial Ombudsman also said it won't look at any cases either. Sadly, these decisions still stand, even after the test case verdict.
The courts didn't follow suit immediately, yet most individual judges do simply suspend claims that are put to them. Though there is still a chance some will allow it to go through, especially in Scotland where the law is different.
Rather than doing nothing, this means it’s still very important you put a claim in now as a marker. Full details are in the Bank Charges Reclaiming guide, including free template letters or see the what should I do section.
Q. How long will the waiver last?
A. No one knows. Technically, the FSA waiver is currently only in place for a year (unless the case is settled sooner), so currently ends on the 26 July 08, although it will be reviewed throughout. The FSA has said it will stop the waiver if it believes it is being abused or is to the detriment of consumers (though I believe a waiver which prevents people getting money that was being paid out to others, is in itself detrimental to consumers). The next key decision point is likely to be the 22 May case management conference.
Q. Were the campaign groups consulted?
A. Well over a million people have reclaimed or are trying to via this site, and hundreds of thousands more through sites like ConsumerActionGroup; however, as far as I’m aware, none of the consumer groups were consulted before this was done. It was simply a fait accompli.
Q. What is MoneySavingExpert.com’s view on this?
A. It’s estimated the banks now have up to £1bn worth of cases on hold, saving them a fortune in payouts and earning them more money in interest. While the test case has always been welcomed, the effective stall on reclaims is an anti consumer nightmare that rails against natural justice.
The Bank Charges Fighting Fund lawyers continue to monitor the case and look at any legal issues and precedents that can arrive, with a view to pushing for an early end to it. There was also a petition to number 10 signed by over 70,000 people and the Banks Charges Protest Song, "I fought the Lloyds", entry into the charts in January 2008 hopefully sent a message to the government, the banks and the FSA that we think the charges are unfair.
Q. Where can I see information on the test case myself?
A. The OFT should regularly update its Personal Current Accounts page with details of its investigation and the test case progress. The verdict from the 24 April is also there, including the full 119 page judgment.
Q. How do I keep up to date with what’s happening?
A. If you are involved in reclaiming or considering it, get the free weekly MoneySaving email, so I can let you know of any changes.
Q: Will I be able to add interest for the delay to my claim once the test case is over?
A: There is no answer to this question at the moment, but I'll be suggesting that people do do this once claims get going again, and I will provide template letters to help.
Q: What should I do if I am reclaiming charges due to a bank error, not due to the fairness of the charges?
A: If this situation applies to you, continue with your claim as it does not relate to the consumer laws being debated. Contact your bank to make this is clear and if it does not help, then refer your complaint to the Financial Ombudsman, which is still investigating other areas of complaint. For details on contacting the Ombudsman see the main Bank Charges Reclaiming guide.
Q: Will I have to pay back any money that my bank has already paid to me?
A: No, regardless of any outcome of the test case. All previous settlements will not be affected, as payouts were a gesture of goodwill rather than a legal agreement. You can keep any money you have already been given. You can also start a new claim for any charges that you have received since your last payout, but this will be put on hold, as with all other new claims.
Q: Will the bank stop adding charges to my account until the test case decides if they are fair?
A: Unfortunately, this is very unlikely to happen but you will be able to ask for them back if the test case finds they are unlawful.
Q: Is the law the same in Scotland?
A: Things are a little different in Scotland, as the contract laws are not quite the same. Also, anything decided by the High Court is only persuasive in Scottish law and will not result in a ‘sist’ of proceedings (equivalent to a ‘stay’ in the rest of the UK).A judge in Scotland has already rejected a bank's sist request saying it is unsatisfactory to delay the case due to waiting for a decision from a foreign court (being England) which does not even guarantee to define the relevant law. This case can be used if you are fighting your own sist.
Whilst some cases are still being suspended, the win on 24 Apr means it's even more likely you could get a sist lifted. The campaigners at the Govan Law Centre believe the result of the test case means the sist is no longer valid in Scottish law, and are looking at whether it's possible to remove the suspensions.
Q: I am currently having financial difficulties, is there any way to reclaim?A: The waiver that allows banks to suspend claims does not apply to people who are having financial difficulties, also known as a hardship case. Banks will have to conduct a filtering process to ensure that cases of genuine hardship are still dealt with during the waiver period.
Although there is no firm definition of what genuine hardship is, it generally applies if your income is not enough to cover reasonable living expenses and afford your financial commitments such as utilities, rent and council tax when they are due or if you are struggling to pay your debts, for example you have mortgage arrears and lots of credit card debt that you cannot afford to pay back.
Examples of how you may be in this position include: loss of employment, disability, serious illness, imprisonment, relationship breakdown, the death of a partner, starting a lower paid job, parental care leave or starting full time education. If you have a basic bank account this could help your case, as these are generally intended for those with financial problems.If your bank is not able to help, you can also send your complaint to the Financial Ombudsman who will decide if your case can be dealt with before the test case is resolved. For details on contacting the Ombudsman see the main Bank Charges Reclaiming guide.
The FOS decide on a case by case basis if your circumstances count as financial difficulty. It cannot continue to process all claims but if you give some clear example of how you are struggling it will decide if you are eligible.
Courts should also work in the same way. If you are at the court stage and your case has been stayed you can ask for this to be removed. The specialist free bank charges reclaiming website, ConsumerActionGroup, has some good templates on this (you need to log in to read the info).
Some also say that taking charges from benefits, such as Income Support or Job Seekers Allowance, breaks another law called the Social Security Administration Act 1992, as this money is needed for a person to live on. If you are in this situation, contact your bank to tell them that you are living on benefits and ask that it considers your complaint. If it doesn't you can also go to the Financial Ombudsman who may take on your complaint.
Q: My bank says my credit card claim is also on hold, what should I do?
A: This is not true. The FSA waiver does not apply to credit cards charges, so you can complain about credit card fees now. Read the Credit Card Reclaiming guide for full details on what to do next.
Q. Will the test case also result in negative effects for consumers?
A. Some people think scrapping bank charges would mean an end to free banking in the UK, yet I don’t think we have free banking in the UK anyway. We have 'fees-free' banking for those in-credit; ask most people with overdrafts if their bank is free? Ask yourself, is fair that the poor members of society are paying for the rich to have free services?
The current account market is also hugely competitive, two banks offer 0% overdrafts, two pay more than 8% in-credit interest. They're all desperate for business and any bank that levies charges will haemorrhage customers.
And let's put this in perspective, while it's big money for reclaimers, for the banks it’s a fraction of their £bns of write-offs due to the Credit Crunch . The Bank of England has just pumped £50bn in there. If they do start blaming bank charges for any new nasty fees, it lets them off the hook for their own credit management, don’t believe their spin.
There’s a chance after the test case has ended that banks will review their terms and conditions, but they are always doing this anyway and always coming up with new services and ways to charge us for these services. This is the nature of the market, and why this site always tries to stay one step ahead, by helping everyone get the best out of their money.
Ask a question or let us know if we've missed something
Discuss the article
To ensure you stay up to date, changes will be in the free weekly email
Other Articles That May Interest You
Council Tax Reclaiming
Pay Less For Going Out
5 Minute Benefts Check Up
Cheap Car Insurance
Always double check the product details before signing up to them
Spotted a brokenlink/out of date info? Let me know at brokenlink@moneysavingexpert.com
LINKS THAT HELP THIS SITE (all have a * in above article)
(this has no impact on product or recommendation - see explanation below)
n/a
You shouldn't notice any difference, the links don't impact the product at all and the editorial line (the things I write) is NEVER impacted by the revenue. If it isn't possible to get an affiliate link for the best product, it is still recommended and still included in exactly the same way. For more details read How This Site is Financed.
LINKS THAT DON'T HELP THIS SITE
(please only use if necessary)
No * Link Available: OFT, No10, ConsumerActionGroup, Govan Law Centre
Duplicate links of the * links above for the sake of tranparency, but this version doesn’t help MoneySavingExpert.com: n/a