Two days ago, I made the unfortunate error of going over the limit of my overdraft on one of my debit cards. I was over the limit by 70p. Although yesterday was (luckily) pay day, it is more unlucky that, according to various sources, the charge for that overdrawing will be at least £20 plus interest. Because I used to advise people in Citizens Advice Bureau, I will now relish the resulting intrigue into the legal issues thrown up by this.
Outlined are several steps that I and any other consumer thinking about claiming should consider in taking such action, with particular regard to recent case law.
Consumer Advice Articles
First, as this subject has been discussed countless times, it is sensible to Google (trademark diluting verb) the most popular practical materials on this subject to find sites such as moneysavingexpert.com and thisismoney.co.uk.
The relevant law regarding fairness or, indeed, unfairness of bank charges is hidden somewhat obscurely under the Unfair Terms in Consumer Contracts Regulations 1999, Unfair Contract Terms Act 1977 and at common law. The banks argue and have argued that charges are a fee for a service. If this is correct, the charges must be reasonable under Section 15 of the Supply of Goods and Services Act 1982.
Click here to read more.
The Supreme Court’s Decision
In November 2009, the Supreme Court, formerly known as the House of Lords, decided not against the fairness of the bank charges themselves, but rather on whether or not the Office of Fair Trading (OFT) could bring the investigation and action under Regulation 6 of the 1999 Regulations.
Led by its President, Lord Phillips, the Supreme Court held that overdraft charges are part of the core charges and services under the contract of a bank account and are, therefore, accepted by the consumer when they sign for the account. Thus, there was no legal basis to investigate under Regulation 6. Nevertheless, the OFT remains free to try other routes. Perhaps by having a Scottish blawger and future litigator called Gavin Ward sent to court to battle it out with the banks after he qualifies in August? Just as easily, in a commercial firm, that same lawyer could be instructed to act for the banks in defending such a legal assault. In passing, in the author’s personal view, since many of the large Scottish banks each hire many of the big law firms in Scotland as their lawyers, having a big firm represent you as a consumer, personally, in taking on the banks is quite challenging. This is not ideal for competition and, indeed, regulation of bank activity. But that’s for another day’s discussion.
Click here to view the judgment handed down in The Office of Fair Trading (Respondents) v Abbey National plc & Others (Appellants)  UKSC 6, on appeal from  EWCA Civ 116 which seems to have been a magic circle bullfight of epic proportion, with not much practical result except for the OFT leaving the Court with its tail supremely tucked between its legs.
What does this mean?
The Supreme Court decision is a further obstacle in reclaiming bank charges. Martin Lewis of Moneysavingexpert said that in December 2009 he expected only 10 – 20% of bank charges refund claims to be successful, but that it was still worth claiming. He explained that “[t]his may be a setback for reclaiming but it is not the end. The likelihood is the money is not coming back for anyone who has claims on hold. There is still hope here, but we have got to do a lot of reading and a lot of legal work.”
Claiming in Scotland
I would have posted this article quicker if it weren’t for the eagle-eyed Professor Hector MacQueen and Scott Wortley of Edinburgh University’s Scots Law News blog for spotting the peculiar case of Allison Walls v Santander noted in the Herald on 15 July 2010.
Allison Walls had her day in the Small Claims Court earlier this week, seeking to reclaim £3000 in bank charges from Santander. Although it was not to be her day. Santander was successful in having the bank charges claim moved from Small Claims to Ordinary Cause (because of apparent “complexity”). As expenses under the Ordinary Cause Rules are not capped, unlike Small Claims, this effectively forces out hundreds and potentially thousands of would-be claimants who may not be able to take the possible or, indeed, probable hit on expenses at the end of the action.
Access to a Court and Human Rights
And so justice will be more difficult for Scottish citizens to access. Is the Scottish legal system not up to it? The right to a fair trial under Article 6 of the ECHR and its parallel public authority compliance mechanism through Section 6(1) of the Human Rights Act 1998, part of which involves the right of access to a court, comes to mind.
Reminiscing of my dissertation, the fair, public and expeditious characteristics of judicial proceedings expressed in Article 6 would be of no value at all if there were no judicial proceedings (Golder v. United Kingdom  ECHR 1, at ). Thus, referring to the rule of law and avoidance of arbitrary power, principles which underlie much of the ECHR, the ECtHR has held that the right of access to a court is an element inherent in Article 6(1) (Ibid., at ; this includes the right to a determination of proceedings on the merits (Gorbachev v Russia, No. 3354/02, 15 February 2007). Although this right is not absolute, any limitation must not restrict access to such an extent that the very essence of the right is impaired (Winterwerp v The Netherlands  ECHR 4, at , ), provided that a legitimate aim is pursued with proportionality between the limitation and that aim (Ashingdane v United Kingdom  ECHR 8, at ).
Small Claims and the Lord Gill Review
Lord Gill would surely have something to say about this. Earlier last year, his committee stated, at paragraph 23, that
The aspirations of the small claims and summary cause reforms in 2002 have not been met. There is a need for better information about where to go for advice and assistance, including how disputes might be resolved without going to court. It was said that the in‐court advice services that exist do a good job but are only available in a small number of courts and cannot meet the demand for their services. It was thought that there was considerable scope for improving the procedures for dealing with lower value cases.
In the author’s personal opinion, it is time for the courts and, perhaps, government to stop sitting on the fence with legal argument that lends itself to squeaky clean judges’ desks. It is quite clear that the public has noted its concern. They realise, (or at least should realise by now!), that banks are businesses unlike any other. And, while the banks might enjoy the benefits of having large capital reserves, somewhat questionable following the recession, the Scottish and, indeed, the British public expect them to be treated as such in the legal systems of the UK. This effective immunity from suit should seriously be reconsidered and, the author hopes, soon.
How to Claim despite Walls being breached
Consumers may be best advised to take the recent shock wave of Allison Walls v Santander with a pinch of salt: there are certain steps, including those from moneysavingexpert.com, which are still worth considering:-
1. Send a style letter to the bank;
2. If unsuccessful and the bank continues to charge, send a different style letter to the Financial Ombudsman;
3. If still unsuccessful, consult a reputable solicitor and take the bank to court, but be prepared for considerable legal expenses and long, drawn out proceedings.
Banks would be best advised not to get complacent: a battle may have been won; but the war, most certainly, is not over.
Research more with this unique WardblawG search engine:-
Gavin Ward, 16 July 2010