OFT Test Case on Bank Charges ......from House of Lords to Supreme Court

[Amethyst]

We will keep you updated as much as possible although we don't expect first news until just after 1pm today.

the queue for security is massive and doors open 10.15 for a 10.30 kick off. Its in the entrance just off that lawn infront of big ben where all the interviews with ministers (mostly ex ministers now lol) take place.

We have one member there today, probably two tmw and thursday and will get info on here as and when though we expect the preliminarys to be quite straightforward.

Also Tom Brennan will be on five live radio at lunchtime talking about the waiver and destruction of data.

Keep an eye on this thread for rambles and news




St Stephen's Entrance


A committee room at the HoL (just to set the mood) not today and probably not room 2a, and ur not allowed to take piccies

[StoneLaughter]

Re: TODAY at the House of Lords - OFT v Banks latest news

If someone had a smartphone (iPhone or the like) FaceBook could be updated from within the courtroom...

[Amethyst]

Okay update give me ten to type it up xx

Preliminarys - Jonathan Sumption QC. on behalf of the Banks is speaking for today and half of tomorrow,

The courtroom is completely packed, theres about 50 members of public there.

The main point the banks are making is that the charges cross subsidise other parts of banking and that doing that isnt against the law - and that mobile phone companies and travel companies do it all the time and no one has a problem with that.

Sumption stated that theres a table in the cruikshank report which relates to frances standing order charges and how they cross subsidise other parts of frances banking system


The Lady lord said about the cross subsidy bit - what if an OAP goes to the hairdressers on a half price tuesday - what about the others that pay full price is that fair etc

Another lord said the OAP would be worthy to be subsidised

Sumption said 'worthiness is not an issue'

One of the lords said banks are like robin hood in reverse

Sumption went through all the contract terms with the lords and basically their objection to the appeal is that there is confusion over the word PRICE in 6(b) of UTCCR regs

He says PRICE should mean the overall charges the banks make is the price/renumeration - ie ALL revenue rather than as the judges seem to think a price like advatantage gold account fee.


He pointed out that SMith in his original judgment said all charges were for a service except for the unpaid item fees and the appeal said all were charge for service INCLUDING unpaid item fees


He also complained that the OFT were attacking the banks of two fronts - competeition with the PCA report and the UTCCR. He complained it was a form of price control and as such illegal.





Also Charges are necessarily many times higher than the cost to the banks as they are a main income stream


2 or 3 times the law lords have stated the in UTCCR if a term is considered unfair it would be unenforceable
Sumption said the UTCCR applies to current and past contracts which raises the financial stakes, he said he doesnt think the lords grasp what the issue is unless they know the consequences and the OFT are saying the consequences are irrelevant. Sumption intends to make the law lords aware of the implications/consequences of the judgement.

[WendyB]

Re: TODAY at the House of Lords - OFT v Banks latest news

well telling a Law lord that he/or she doesn't grasp what the issue is, is playing with fire in my book!

[Budgie]

Re: TODAY at the House of Lords - OFT v Banks latest news

Well it looks like the banks are going back to the complete package of services angle and stating that they can basically charge whatever they like in terms of default fees because they are part of their main revenue stream.

If that's all they have got then IMO it's game over for the banks, this has already been argued to death in the original hearings, which they lost.

Am just off to get my hair done ( it's cut price Tuesday !!!!!!!!!!! ) although I am not an OAP I do consider that I am worthy !!

[natweststaffmember]

Re: TODAY at the House of Lords - OFT v Banks latest news

That price control bit really annoyed me as the OFT in 842 default fees and credit cards set a limit of £12 or they would take regulatory action. It further stated that it shouldn;t be the case that they drop their fees to £12, so what did they all do? Lowered it to £12. Ridiculous.

[Curlyben]

Re: TODAY at the House of Lords - OFT v Banks latest news

Nice one.

I love these points.

one of the lords said banks are like robin hood in reverse

He complained it was a form of price control and as such illegal.

He pointed out that SMith in his original judgment said all charges were for a service except for the unpaid item fees and the appeal said all were charge for service INCLUDING unpaid item fees

Now should we send him a new pair of shoes as it appears to have his current ones stuck in his mouth

[Amethyst]

Re: TODAY at the House of Lords - OFT v Banks latest news

BBC report from this mornings events....

ok worked out the robin hood bit - Ian is coming from the banks refute Law Lords claims that the are robin hood in reverse angle - whereas i think its ore fun to quote the law lord who suggested they were

Ian is a much better writer than me lol but then he had more time...and shorthand lol

Banks 'not Robin Hood in reverse'


Billions of pounds of past and future bank income are at stake

The House of Lords has been told that banks are not "Robin Hoods in reverse" when they levy overdraft fees.
Seven banks and the Nationwide Building Society have started their Appeal to stop the Office of Fair Trading (OFT) regulating their overdraft fees.
Jonathan Sumption QC claimed the banks were not taxing the overdrawn for the benefit of others.
However, he told the Law Lords that overdraft fees involved a large element of cross-subsidy.
The outcome of the hearing may decide if millions of bank customers are able to reclaim billions of pounds in past charges from their banks.
'Fairness'
Mr Sumption, for the banks, argued that existing consumer contract regulations did not give the OFT the power to regulate prices.
THE STORY SO FAR...
Nearly a million people have claimed for the return of their unauthorised overdraft charges but their cases are on hold
If the banks win this week's appeal, these people are unlikely to get any money back
If the banks lose, then the legal arguments should move on to a key stage - a case to determine whether these charges were fair or not
Only then will people have a clearer picture as to whether billions of pounds will be handed back to customers



Crunch time for bank charges case

He said that bank overdraft fees were required to be clear but were not necessarily required to be fair.
The High Court and the Court of Appeal have both previously upheld the right of the OFT to scrutinise the fairness of bank charges under the 1999 Consumer Contract Regulations.
Mr Sumption said both of the lower courts had been wrong, and had both over-refined and overcomplicated the interpretation of the regulations.
He pointed out that the regulations were not designed as a mechanism of price control and were not aimed at regulating what services were offered or the price charged.
They did not, he argued, apply to the main subject matter of a contract or the price being charged for it - only to ancillary or contingent charges.
"The overdraft charges are too fundamental to the bargain to be declared unfair," he said.
Cross-subsidy
He told the five Law Lords hearing the appeal that overdraft fees involved a large element of cross-subsidy.
Jonathan Sumption QC is arguing the banks' case

People who went overdrawn without permission were paying part of the cost of providing current accounts to people who always stayed in the black.
So the charges exceeded the cost of dealing with an overdrawn customer because "the revenue stream is essential to the whole of the current account structure".
Mr Sumption explained that cross-subsidies were common in the banking industries of other countries such as France, Canada, Australia and the US.
He said they were common in the charging structures of many other complex sets of services such as airline ticket prices or mobile phone tariffs and were not objectionable.
One of the Law Lords asked if it was the case that bank charges included a surcharge to subsidise those who did not go into the red.
Another Lord suggested overdrawn customers were being taxed for the benefit of others.
But Mr Sumption said it was "tendentious nonsense" to suggest that banks were operating as Robin Hoods in reverse.
He went on to say that a victory for the OFT might render all past overdraft payments unenforceable and might lead to "restitution".
"The OFT has significantly raised the stakes," he said. "The issues are of considerable importance to consumers and the future of retail banking."

[Amethyst]

Re: TODAY at the House of Lords - OFT v Banks latest news

tick tock tick tock.....

[natweststaffmember]

Re: TODAY at the House of Lords - OFT v Banks latest news

Has the OFT QC remained unchanged?
------------------------------- merged -------------------------------
Brick Court Chambers | Jonathan Sumption QC

Info on Jonathan Sumpton QC

[gamesblaster]

Re: TODAY at the House of Lords - OFT v Banks latest news

Sounds to me like a no brainer, the whole argument is a bout disproportionate charging, and this has always been the case how can they charge somebody £40.00 for an unpaid £10.00 direct debit. The banking institutions have had there day in this country ,and have more recently brought it to its knees. All they have done is delayed the inevatable. I really do hope the lords see sence in this case. Maybe for once a decent and fair banking system will be born from the current mess.

[Amethyst]

Re: TODAY at the House of Lords - OFT v Banks latest news

Rightio

Suption is on again in morning for about 20 minutes, then Abbey will take over for the rest of morning then thats it for the banks case and it goes over to the OFTs turn.

All a bit boring but basically arguing over definition of price - Sumption (banks) argued that forgone interest was already part of the price - in the original hearing Nationwide argued the same thing I believe (will look it up in a minute)


EXc will write more up when he gets back as i was mid picking child up from cooking club.

[Amethyst]

Re: TODAY at the House of Lords - OFT v Banks latest news

Legal Beagles


EXC asked Nationwide about the interest forming part of the price for accounts back in April 08

From: EXC
To: graham.beale@nationwide.co.uk
Sent: Friday, April 18, 2008 11:04 AM
Subject: PCA price query



Dear Mr Beale

As a personal current account holder with a regularly high credit balance, I would be grateful if you could answer some questions relating to the pricing structure and cost of my account.

During his submission to Justice Smith in the OFT v Banks test case hearing, lead QC for Nationwide, Geoffrey Vos, stated on the subject of the cost of personal current accounts ''And what is the price? Well, my Lord, the price is broadly free for the credit customer, except of course we retain the difference between the interest rate that we give the credit customer and whatever commercial interest rate we are able to achieve on the money deposited, and that can be regarded as part of the price.''

1. Please confirm that this statement, made on oath, is correct.

2. If correct, could you kindly explain why this 'price' and therefore cost, is not referred to in any of your personal current account terms & conditions, both past and present.

I would be grateful for a concise reply.


Yours sincerely

EXC

-----BEGIN PGP SIGNED MESSAGE-----
Hash: SHA256

Dear EXC,



Graham Beale has asked me to respond to your e-mail of 18 April.



I confirm that the extract quoted in your e-mail did form part of the
submissions made by Geoffrey Vos QC to the court during the bank charges
test case hearing.



In common with all other financial institutions which are in the
business of lending money, Nationwide aims to lend money, on average, at
a higher rate of interest than it pays to investors. This is known as
an "interest rate margin". Nationwide's interest rate margin is one of
the lowest in the industry. Profit made through the interest rate
margin is used, in part, to offset the cost of providing accounts such
as FlexAccount and this is the point being made by Mr Vos. The rates of
interest paid on credit balances in FlexAccounts and the rates charged
for FlexAccount overdrafts form part of the terms and conditions of the
account. The rates charged by Nationwide on other types of loan are not
part of the FlexAccount terms and conditions and are not, therefore,
specified in those terms and conditions.



Yours sincerely,



Charles Bacon

Solicitor

Legal Department

Nationwide Building Society

So thats a good basis for their case lol

[Happyolddog]

Re: TODAY at the House of Lords - OFT v Banks latest news

If the "interest rate margin" is the basis of their defence then their defence should fall flat on its face, because as well as charging this "interest rate margin" which I agree with, as it is a spread that keeps the financial institutes working, but they also charge a fee; ie, the £25, £30 0r £40 they feel greedy enough to charge, which we all know hs been proven to be unlawful. They really have no defence if that is all of the amunition in their armoury.

[EXC]

Re: TODAY at the House of Lords - OFT v Banks latest news

Just to pick up on what Ame was saying, a Law Lord specifically asked Sumption ''Is foregon interest part of the price (of a current account)'' and Sumption answered ''no''.

When asked the same question by Justice Smith in the original hearing. Geoffrey Vos - QC for nationwide - said yes.