The Way Ahead For Bank Charges Claims

With a loss in court for one bank charges claimant up for appeal, we consider the lessons learned.

After writing my preliminary view on Berwick vs. Lloyds TSB (read Lloyds Bank Wins Bank Charges Case), I still haven't received a copy of the judgment from the court, which it promised me! Happily though, many Fools sent me a copy.

The story now though is that the case is up for appeal, which means it'll be considered by a higher court. In the meantime, there are still some interesting tips that have arisen from this claim.

Understand the arguments

You must take the time to understand thoroughly all the arguments, particularly if it's got to the stage where the bank has submitted a defence. Here are some tips.

You are allowed to plead your claim using more than one argument. Here are the two we've been using:

• The charges are for breach of contract. They are clearly disproportionate and therefore penalties, which is contrary to common law and consumer regulations.
• If the charges are for a service, the price exceeds what is reasonable as required by S.15, Supply of Goods and Services Act 1982

The bank is also allowed to plead its defence using alternative arguments. The two main ones the banks will use are:

• The charges simply cover their administrative costs for attending to the breach of contract.
• The charges are for a service, and are not, therefore, penalties for a breach of contract.

The Consumer Action Group (CAG) suggests you offer the court this:

On the issue of whether the charges are proportionate

• That the process is an automated process.
• That the process operates many thousands of times each day and millions each year so that the cost of it is spread over a huge number of transactions and shared equally between them.
• That the bank has been invited to provide a proper breakdown of its costs and that it will not do so.
• That a senior and highly respected member of the banking industry, Peter McNamara, said on BBC Radio in 2004 that the charges were used to fund free banking for all personal customers. (This argument is especially useful for claims against Lloyds as he was head of personal banking at Lloyds). You should produce a CD of the interview along with a CD player.[see below} Give the bank an advance copy about 21 days before the hearing (recorded delivery) and warn them that you will be producing it in court. Warn the court as well.
• You can call in other documents such as minutes of select committees or letters to you or to others where the banks either expressly or impliedly admitted that the charges are more than is needed to cover their losses.

On the issue of whether the charges are merely for a profitable service

• You are arguing that under s.15 Supply of Goods Act the cost of the 'service' is required to be reasonable. S.15 says that where no price is agreed at the time the contract is made, that a reasonable price will be implied.
• The cost of blocking a DD and sending letter is most probably less than 50p (or whatever you think that you can argue). The bank is a High Street business. Normal mark-ups on the High Street are 100%. It would not be reasonable for the bank to mark up significantly higher than this without a full and detailed explanation.
• The actual cost cannot be very high because the service is highly automated and operates millions of times per year so that the cost is spread and shared widely.
• The bank has been invited to provide a detailed breakdown of its costs and it will not do so.
• You can bring in useful documents as well where for example the bank has argued that the charges do only allow them to recover their losses. If the bank argues this then it effectively destroys their case that the charges are the reasonable price of a service.

CAG adds:

"Read through this guidance. Practise the logic. You will find that it will suddenly 'click' with you and at that point you will be able to talk about it fluently and also develop upon it if you are called to do so in court."

> Read The Ultimate Guide To Reclaiming Bank Charges.
> Download the Peter McNamara interview.
> First things first! Compare current accounts and set up a parachute account, in case your bank tries to close yours when you claim.