The Supreme Court Decision on Bank Charges

What was the Supreme Court decision on bank charges?

The decision of the Supreme Court was a relatively simple one given the issues involved.

The Supreme Court made a ruling stating that the Office of Fair Trade had no legal authority to decide on the matter of whether the bank charges were fair or not. It held that it was not their call to say that the charges were excessive.

Basically, the Supreme Court ruled that the bank charges do not fall under the Unfair Contract Terms in Consumer Contracts Regulations 1999 which therefore puts it outside the jurisdiction of the Office of Fair Trade.

In addition, the Supreme Court ruled that the overdraft charges were merely bank fees for the use of a current account. There was notably no mention made about whether the Supreme Court thought the charges were fair.

What were the major factors taken into consideration for the decision?

The major factors that paved the way for the decision was the judgment of the bank that the Office of Fair Trade had no role in evaluating the bank charges. The other factor was the statement of the Supreme Court that the overdraft charges were in fact charges made for the use of the current account. This therefore puts them outside the jurisdiction of the Unfair Contract Terms in Consumer Contracts Regulation.

There is a lot of talk that the decision was actually made on a technicality. The question was all about jurisdiction– whether the Office of Fair Trade had the legal basis to say if the bank overdraft charges were excessive or not. It did not discuss in particular the nature of the bank charges.  And that’s what the other claimants are banking on: that there will be a way to get a ruling on whether these charges, regardless of whether they are fees, are either excessive or otherwise.

Also, there are many who believe that the Office of Fair Trading challenged the bank charges on the wrong basis. Whilst some doors have been closed, in truth many remain open.

What happens to the overdraft charges that were returned?

The general view is that these will comprise a kind of goodwill gesture by the banks and there will be no attempt to recover them anymore. While this will be a source of joy to those who already received their claims, it is one that will leave the millions who were subject to the unpopular decision even more disgusted with the current situation.

What happens to my application for refund of overdraft which was put on hold?

Applications numbering in the millions were put on hold pending this decision. Now that the decision has been made, the hold has been lifted and processing can resume.

However based on the decision, it is clear that there will be few cases where the charges will be returned except where the consumer can prove financial hardship.

Is this the end of the road for the Office of Fair Trade Battle?

If the major supporter of the movement for claims is to be believed, the battle is not over. Whilst it is true that the Office of Fair Trade cannot appeal anymore since the Supreme Court ruling is final, there are other cases it can pursue against the banks. One case is anti-competitiveness since the bank charges are practically identical. Right now, consumers are being advised not to give up just yet.

What are the major repercussions of the Supreme Court decision?

This has some major effects on the people who were hoping that they would receive some form of relief. After all, most of the claimants appear to be in financial hardship and some of their claims run into thousands of pounds.

It was truly a major disappointment for those waiting for refunds while banks for now can heave a sigh of relief since they have been saved from the gargantuan responsibility of refunding hundred of millions of pounds.

Did the Supreme Court actually make a hint regarding another solution?

Yes, the Supreme Court did make a hint about an alternative by which the charges can be challenged. Remember, the ruling never said anything about the charges being fair. They only said that the Office of Fair Trade has no right to make a ruling and that the charges are in fact fees for the use of a current account. The law was silent about the excessive amount charge.

In fact, the judge even hinted that the ruling made does not disallow the right of people to challenge the charges on the basis of an imbalance as mentioned in clause 5 of the Unfair Terms in Consumer Contracts Regulations.

What are the chances of getting claims based on hardships?

The decision seems to leave this area uncertain. However, the banks, under the Financial Services Authority, have always been under the obligation to be fair to their clients. This includes making allowances for those clients in financial hardship.

What is the impact of the decision on the other claims regarding credit cards and the payment protection insurance?

None. The decision is only with regard to the overdraft charges. The claims for other charges still stand. So those who wish to claim for the other charges can do so without fear.

Is there a glimmer of hope for the millions of claimants left in the cold?

Yes there is. Aside from the Office of Fair Trades determination to continue the fight against unfair charges, there is an option to take this matter to the Financial Services Authority.

The argument being made now is that with the pronouncement that the overdraft are merely bank charges, then that would mean that they can now fall under the jurisdiction of the Financial Services Authority.

If it can be argued and proven that they in fact fall under this jurisdiction, then the decision on the amount of charges can now be challenged via this avenue. Then the Financial Services Authority will be constrained to make a regulatory judgment on the fairness of the charges. In other words it will no longer be a legal matter.