Bank Charges

[Davros]

I stuggle to understand this.

As a general principle people agree terms to a contract, often with consequence for non performance. On that basis (and only that basis) the charges are fair - it was agreed. If you don't like the level of charges you agreed to, go bank somewhere a bit more flexible.

As you point out there has been a huge success rate in overturning these, therefore there is some piece of legislation somewhere which prevents this. I don't believe it is covered by the banking act, but might be.

The argument against these fees seems to be that they are onerous, and disproportionate, therefore struck out.

But isn't that the case with a lot of things? Levae your car 2 minutes over your alloted time and get a 60 quid penalty. That was in the contract agreed to, that is equally onerous, should it be struck out?

The law exisits to stop people being made a fool of. Not of making a fool of themselves. Breaking terms they have agreed to comes into the latter category IMO.

No, that is not correct. As the Dalek Supreme (spit) pointed out, parking illegally is a crime. Not paying your card on time is not a crime. The law being referred to is a one of contract law and is nothing to do with the banking act or anything like that. It is quite simple and basically states that penalty charges in contracts must accurately reflect the costs incurred due to the breach of contract. By law, penalty charges for breach of contract cannot be punitive. The interest levied is the only correct charging mechanism allowed by law - penalty charges are simply to cover costs, no more and no less.

[threaded]

Overstaying in the parking bay isn't a crime. I think what happens is that there is a standard fee for parking in a bay, and you get it discounted if you pay'n'display. If you go over the alloted time then you have to pay the full fee.

[NetwkSupport]

I think the point is that the majority of banks charge an average 25-30 fees and lets face it you have to have a bank account to do anything so you choose one that suits you.

However if you are in financial difficulty the charges do not help you out and mostly they make it worse.

Example, my girlfirend lost her job and missed a direct debit whilst she was unemployed. The HSBC charged her £125 but also sent her a letter stating "if you are in financial difficulty please contact us" she phoned them and they basically said the £125 still stands, we dont give a 'ss'' if it takes you £125 over your agreed overdraft (she got charged another 25 for going over the agreed over draft.

[ASB]

No, that is not correct. As the Dalek Supreme (spit) pointed out, parking illegally is a crime. Not paying your card on time is not a crime. The law being referred to is a one of contract law and is nothing to do with the banking act or anything like that. It is quite simple and basically states that penalty charges in contracts must accurately reflect the costs incurred due to the breach of contract. By law, penalty charges for breach of contract cannot be punitive. The interest levied is the only correct charging mechanism allowed by law - penalty charges are simply to cover costs, no more and no less.

In terms of the parking analogy I wasn't referring to illegal parking. I was referring to overstaying, e.g. at an NCP or a bylaw controlled car park. Stikes me as this is pretty much the same thing.

You are quite right in that penalties for breach of contract can only reflect the losses sustained.

But here we are not talking about breach of contract - i.e. failing to adhere to a contract, but a contractual remedy. A clause within and agreed to by both sides. [Maybe the view has been taken that it is not a remedy, struck it out and then it does become a punitive breach]

As I understand it the 1977 unfair contract terms act has be used sucessfully to oppose these charges. But onerous does not equal unfair.

I just don't see that's it's really unfair. All the victims had to do was to keep their side of the bargain.

I'm not siding with the banks, I do think the charges they levy are disproportionate and it's right that they should get the wings clipped.

[Mailman]

But here we are not talking about breach of contract - i.e. failing to adhere to a contract, but a contractual remedy.

Im sorry but you are talking a pile of syed bollacks here!

Contract law is quite clear that penalty clauses, such as those contained in the contract between yourself and the bank, are unenforceable (ie. they can only claim back the actual cost of the breach, nothing more).

As I understand it the 1977 unfair contract terms act has be used sucessfully to oppose these charges. But onerous does not equal unfair.

They are unfair for as long as the banks refuse to clarify what exactly goes in to the charge they punish you with when you go over drawn. As soon as they can justify their excessive charges then the fee moves from being "unfair" to fair. Until that time, the charges are unfair and unenforceable under current English law.

I just don't see that's it's really unfair. All the victims had to do was to keep their side of the bargain.

So lets see the banks apply their charges according to the law. I mean, lets face it...these charges dont represent what it costs the banks to get their money back. They are nothing more than a profit scheme, clear and simple.

After all, its only fair!

Mailman

[NetwkSupport]

Im willing to bet that the banks have already worked out what the "actual cost" of the breach is and it probably amounts to about 2% of what they are actually charging people !!!

[ALM]

Until that time, the charges are unfair and unenforceable under current English law.

Wow. Are you a freelance judge too Mailman?

I suspect banks would simply argue that the charges are actually fair. Given that we’re informed of the charges when we open accounts, the banks have us over a barrel don’t they?

[NetwkSupport]

Seeing as they have so far paid out 50% of claimants straight away with no argument and the rest after threatening futher action then i think they are quite aware that they are operating unfairly!!

[ALM]

Seeing as they have so far paid out 50% of claimants straight away with no argument and the rest after threatening futher action then i think they are quite aware that they are operating unfairly!!

50%? If true, that is impressive. Do you have a source for this?

[Lucifer Box]

Look, lads, there's no point arguing about it. For once Mailman is correct and Dalek Supreme had it right at the beginning. The OFT themselves reminded the banks on 6th April 2006 that penalty charges for breach of contract that exceed the costs incurred are in breach of English law and cannot be enforced. The OFT have also stated that they would consider any penalty charge for breach of contract in excess of £12 to be unenforceable (the courts have forced refunds of much lower amount however).

For those who still want to debate the ins and outs, this site has all the relevant details and provides a variety of form letters and so on: The Consumer Action Group