We talk to Tom Brennan about his penalty bank charges case and give some tips about what to do if you still haven't made a claim yourself.
I first wrote about the right to claim back penalty bank charges last May and the story keeps getting bigger and bigger! One claimant recently received £36,000 from NatWest while The Consumer Action Group has surveyed 7,000 people who collectively have recovered more than £10,000,000 from their banks.
Things should get even more interesting when a bank charges claim reaches court for the first time soon.
The case has been launched by barrister Tom Brennan who is claiming against NatWest. Previously, banks have settled bank charges claims without a court hearing, but, unlike all his predecessors, Brennan has found a way to force the claim before a judge. We talked with him recently about his claim and what it will mean for other claimants. You can hear the podcast at Money Talk: Landmark Illegal Bank Charge Court Case.
Here are just some of the interesting points that came up.
We might be able to claim beyond six years
In most small claims that don't involve personal injury, you are allowed to make claims for losses that go back six years and no further. However, for bank charges cases there has been speculation that people can claim back further than this, based on one clause in what's called the Statute of Limitations. Tom Brennan also believes that he might be able to claim beyond six years.
The Office of Fair Trading
The Office of Fair Trading stated in April 2006 that, if credit-card companies don't reduce their charges for such things as late payments to less than £12, it will presume that the charge is unfair and that it is 'likely to challenge the charge unless there are limited, exceptional business factors in play'. However, Brennan said that Egg are still charging £16. The question is, why hasn't the Office of Fair Trading stepped in?
The concern now is that the OFT may be soft on bank charges too, when it reports later this year. It might be that it will consider that it's more important for the majority of bank-account holders to continue to have free banking, which means it will be loath to jeopardise that by effectively decreasing the profits made from personal banking.
Strong views on the right to reclaim
Brennan's views on the right to reclaim are at least as strong as mine. He said:
'I have been a victim in this, along with tens of thousands, hundreds of thousands, maybe even millions of people across the country.
'Why should the poorest people in society be subsidising the richer members of society in free banking? That's the most ludicrous and obscene argument I think I've ever heard.'
This is pretty much what I said in an earlier podcast. If the rich can optimise their finances by attempting to pay less tax than poorer people, why can't poorer people also optimise their finances within the law?
However, Brennan went on, and rather more eloquently than me (at least, with the spoken word!):
'NatWest last year made £4bn. Now why can't they just make £3.8bn or £3.4bn, rather than £4bn and impose these charges on the very poorest people. It's sickening that they have this kind of conduct and they've actively, knowingly gone about this to inflict this kind of harm on the people who can afford it least. People's lives are ruined because of this.'
Aggravated damages
Brennan is claiming for aggravated damages, which is, as far as I'm aware, a first in bank charges claims. He said:
'You can gain those for breach of contract where, for example, someone like a bank has damaged your credit rating because they refused to make payments on your account when there were funds to cover it...Now I, as a result of these matters, incurred higher levels of interest and additional charges from other providers...and so I'm able to claim for that.
'I'm claiming that their conduct in this case is so bad that they deserve to be punished in that respect.'
Brennan did not put a figure on aggravated damages, which means it will be at Judge Peter Simpson's discretion how much is awarded, if at all.
Exemplary damages
Brennan is also claiming exemplary damages, another probable first in these claims. He said that these claims were more common in the US, where they sting corporations for their bad behaviour:
'Now very rarely is that awarded in this country for normal conduct. It's normally used against government officials like police abusing their powers etc...What I'm arguing is that in this case it's appropriate because NatWest have been acting unlawfully with a view to making a profit.
'They take your money and do things like loan it back to you at 25%...because you're over your overdraft facility.'
Again, it'll be up to the judge to decide on whether these damages should be awarded.
An accidental crusader
Brennan claims that he is no crusader. He said:
'To be shafted, effectively, by your bank and then them have this kind of position that "No, you can't touch us. We are too powerful." That's been their position and that annoyed me.'
But that's not how many will see it, especially after comments such as this:
'There are people with families and there are people trying to pay mortgages who are being treated in this way by the banks and they don't know their rights and there's no way that they'll be able to bring an action.
'As a matter of principle this is wrong. It's unfair, it's unjust and it's got to be stopped.'
What if Brennan loses?
Brennan's court hearings have been put back several times. He will next appear before the judge on Monday 30 April. On that day, the judge will consider NatWest's application to throw out the claim without hearing it. It is expected that this debate about whether or not to hear the case will take all day. If Brennan loses the application, then there is a risk that he will have to pay NatWest's costs, which could be in the tens of thousands. Brennan judges this risk to be 'small'.
Then there is the actual hearing, where the judge will need to decide whether the bank charges are a penalty. In the unlikely event that he decides the charges aren't penalties, then the repercussions for Brennan and all other claimants could be terrible: NatWest, and most likely the other banks, will probably stop refunding people.
What if Brennan wins?
In Brennan's own words, what he'll get out of it is 'Immense satisfaction. These guys are like massive school bullies.'
As for everyone else, NatWest customers can expect that the penalty term in their contracts will have no effect. Brennan believes that NatWest will then start repaying the charges in full as soon as they receive a request, rather than dragging it out by denying the charges and by trying the dozens of other dastardly tricks that banks have been using.
Brennan added:
'I've started getting together a group of like-minded people who will bring claims against all the other high-street banks.'
The biggest effect of a Brennan victory would be the psychological boost for future claimants. The second biggest effect could be that claims might be processed more quickly and with less resistance.
The right to appeal
Both Brennan and the banks can appeal the decision, and you can expect the loser to do so. However, we can hope that a final resolution won't take too long. Brennan said:
'The banks have a right to appeal, (but) there would be very strong grounds for having this case heard quickly.'
My tips
Reflecting on our podcast discussion, here are some suggestions:
- Don't wait for the Office of Fair Trading's ruling, because it is not relevant -- as I said in Penalty Charges And Other Banking Tricks! Regardless of its eventual ruling, you will still be able to pursue your own claim for a refund.
- If you have charges older than six years, you should act immediately to get details of your charges. It's believed that some banks hold data as far back as twelve years, but if they believe that we have a chance of claiming this, they may start shredding, or burning, the older files!
- Personally, after getting the details of my charges from the bank, I'd just get on with my claim. However, you may want to hold off, particularly if you bank with NatWest, until the result of Tom's case is heard. You may then even consider adding exemplary and aggravated damages to your own claims.
Brennan rates the risks as small, but the potential downside is significant for all of us. So let's hope his case goes well!
> Start -- and finish! -- your claim for unfair charges by reading The Ultimate Guide To Reclaiming Bank And Card Charges.
> Prepare a parachute account, in case your existing bank decides to close your account, which is what happened to Brennan. Compare current accounts and switch!
> Listen to the podcast for more about exemplary and aggravated damages, the reasoning behind Brennan's case, and more!