OFT bank charges investigation derailed by Supreme Court ruling
The Office of Fair Trading loses two-year fight to investigate overdraft charges by high street banks
Laurence Rabinowitz QC
The Office of Fair Trading suffered a major blow in the Supreme Court this morning when the country’s most senior judges ruled that the regulator could not investigate the fairness of overdraft charges for unauthorised bank charges.
The five justices of the Supreme Court, led by president Lord Phillips of Worth Matravers, ruled that such an investigation would be beyond the scope of the OFT.
The seven banks and one building society in question had lost their fight against the OFT in both the High Court and the Court of Appeal.
The High Court decided in April 2008 that the overdraft charges could not be deemed as penalties but they could be assessed on their fairness under the Unfair Terms in Consumer Contracts Regulations 1999.
That decision was upheld by the Court of Appeal in February but then the banks appealed to the House of Lords and that hearing was heard in June.
The decision to overturn the Court of Appeal’s ruling will come as a shock to the one million claimants who had sought compensation from the high street banks for being charged unfair overdraft fees. Those actions had been stayed until the 26 January 2010 pending the outcome of the two year battle. It is believed they will now be struck out altogether.
The line up:
DEFENDANT
The Office of Fair Trading: In-house team instructed Jonathan Crow QC, 4 Stone Buildings.
CLAIMANTS
Abbey: Wilson Thorburn, Ashurst, instructed Ali Malek QC, 3 Verulam Buildings.
Barclays: Colin Passmore, Simmons & Simmons, instructed Brick Court’s Jonathan Sumption QC at the appeal stage (instructed Ian Milligan QC of 20 Essex Street in the High Court and Court of Appeal)
Clydesdale Bank: Michael Barnett, Addleshaw Goddard, instructed Richard Salter QC, 3 Verulam Buildings.
HSBC: Simon Orton, Freshfields Bruckhaus Deringer, instructed Mark Hoskins QC, Brick Court
Lloyds TSB: Philip Parish and Andrea Monks, Lovells, instructed Bankim Thanki QC, Fountain Court.
HBOS: Marc Florent, Allen & Overy, instructed Robin Dicker QC, 3-4 South Square
Nationwide: Ewan Brown, Slaughter and May, instructed Geoffrey Vos QC, 3 Stone Buildings
Royal Bank of Scotland Group: James Gardner and Andrew Hughes, Linklaters, instructed Laurence Rabinowitz QC, One Essex Court.
The ruling justices of the Supreme Court
Chair: Lord Phillips
Lord Walker
Lady Hale
Lord Mance
Lord Neuberger
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Readers' comments (43)
Anonymous | 25-Nov-2009 11:40 am
Just typical of the OFT going after big business without thinking it through. Seems the judge said that the OFT got the terms of reference wrong. Now thousands of people will be even more out of pocket as the banks will not settle any claims and could even put them up. Congrats Mr Fingleton
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Lena | 25-Nov-2009 12:05 pm
I can't believe this. I just heard on the radio that whoever represented bank in courts, said - There is no such thing as free banking. Helloooo, we - people know that, what we also know is that the whole charging system is Unfair!!!!! For god sakes!!1 I am so annoyed about this. What can we do?! So, so Unfair!!!
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Anonymous | 25-Nov-2009 12:14 pm
Another bailout for the greedy banks by those worried about the value of their personal shareholdings....what a disgrace.
Banks borrow money (from the public) at rates as little as 0%....can the public borrow at these rates, or anywhere close to them? No. Banks make plenty of money by lending to the public at interest rates as high as 20% or more.
The banks have been creaming off this country's wealth for their shareholders for years, yet the public is currently underwriting them. This is ridiculous, and a national scandal. The government needs to end this cosy relationship with the banks and provide a proper, state run bank which lends to the public and small businesses at affordable interest rates, and isn't run on a profit basis. That might actually lead to some wealth creation in the country, and less incidences of financial hardship for poor individuals whose situation is being made worse by punitive and excessive charges on top of the already high overdraft interest rates they are paying.
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Anonymous | 25-Nov-2009 12:37 pm
As the Supreme Court has let us all down, we will just have to take action against the banks ourselves.
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Anonymous | 25-Nov-2009 1:11 pm
Heaven preserve the legal profession (or perhaps their employers and clients) if the first four posts were made by lawyers as they contain just unreasoned ill informed emotive points without any rigorous analysis
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Anonymous | 25-Nov-2009 1:30 pm
How oh how Anonymous 12:37 got published on this site is way beyond me, but what do I know....
Anyway, overdraft charges (and any other charge for that matter) are conditions of the account. It's as simple as that. They are avoidable and so really, the OFT was simply answering to public pressure. I wonder how much money they have wasted. Don't we also fund the OFT by the way? I agree with the very first comment. The OFT have messed up here.
Talking about interest rates and the banks' reluctance to lend is a completely different discussion. This is clearly an emotive subject for us all but that's not really an excuse for Anonymous 12:37pm encouraging that sort of behaviour. Also, re the suggestion of a state run bank to lend to us all - that would be brilliant in communist Russia. In modern day Britain, not such a great idea
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I .G. okorji Esq. | 25-Nov-2009 1:31 pm
The ruling of the Supreme Court is not about the unfairness of bank charges but about the legal status of OFT to challenge the charges. It is open to the consumers to individually pursue their banks in Court where unfair charges has been levied.
I will be among the first group to challenge the unfairness of the charges in court post the judgement.
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Richard | 25-Nov-2009 1:36 pm
The thing that annoys me about this is that.
1) They have said their is no such thing as free banking although most banks pay minimul interest on holding our money if any. And most bank accounts now have a sub charge per month anyway.
2) We bail them out with tax payers money for them to use it on bonuses and golden handshakes for leaving directors. Not for improving lending at reasonable rates for which it was meant.
3) the charge of £20-35 per charge, how can this be warrented. All they do is send an automated letter and have an automated system leave you a message on your telephone.
As for the idea of a government run bank, they have caused this problem in the first place. Bailing out these banks when they should of been left to go bump like they deserve. And also has anyone known the government to do anything successfully. They cannot even process a Direct debit payment for Council Tax without taking more than they should.
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Anonymous | 25-Nov-2009 1:40 pm
Absolute disgrace for both the Supreme court and the banks. Whatever happened to consumer rights in this country?
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Taxpayer | 25-Nov-2009 1:52 pm
This decision is not particularly surprising. Given that the banks involved are propped up by taxpayers’ money, a judgement in favour of siphoning some of this money back to account holders in the midst of this economic crisis was always unlikely. Had this claim been brought 3 years ago then the cause may have gained favour with the Lords.
Like it or not, any sort of claims against banks involving potentially large payouts are going to fall flat until they start making shed loads of cash again and this country’s economy is comfortably out of recession.
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