The FSA -v- The OFT – Part 2

In this post, and those that follow, I will continue to contrast the FSA and the OFT both in terms of the powers they have – at law, and the manner in which they use such powers.

Let me start with a repeat from an earlier post of where I believe the starting point for the OFT's efforts over bank charges began. I will use another item to provide further evidence of that starting point below, in a press release from the OFT itself..

These are extracts from a BBC article in May 2006:

"Recently - and unexpectedly - the Office of Fair Trading (OFT) ripped into the banking industry's charging regime. 

The OFT said that in the future, credit card late repayment charges in excess of £12 would be considered unfair and likely to be challenged in the courts. 

Charges, the regulator argued, "should only reflect the administrative costs of dealing with the default". 

Not all that dramatic a statement, perhaps, when applied to just the credit card industry.  But when the OFT said the same principle would also apply to default charges on overdrafts, you could almost hear the gasps from UK's banks and building societies."

Do those comments reveal, and significantly reveal, how the OFT address the question of fairness over charges, namely that they “ …. should only reflect the administrative costs of dealing with the default”?

For me “fairness” over charges may entail a great deal more, and I think many of those who have been faced with charges might agree. Three easy examples:

It might involve not just the level of the charge, but the number of times it is levied. 

 It might involve how the imposition of any levies were communicated, if at all. 

 It might involve taking into account the financial circumstances of the customer.

Leave those thoughts just to stand for the moment, but they will be central to this comparison between how the OFT view such matters, and how the FSA view them.

Let's first make sure that by using only those comments from a BBC article, I am not providing sufficient evidence of the OFT position. What do they think is fair or unfair when it comes to charges, is it just the amount and how that is calculated?

This is a Press Release  issued by the OFT in April 2006, please read it in full, however these are for me the items of significant relevance:

" ... The OFT now expects all credit card issuers to recalculate their default charges in line with the principles set out in a statement published today and to take urgent action where needed to reduce the level of credit card default fees. The industry has until 31 May to respond to the statement. These principles also apply to default charges in other consumer contracts such as those for bank overdrafts, store cards and mortgages.

Where credit card default charges are set at more than £12, the OFT will presume that they are unfair, and is likely to challenge the charge unless there are limited, exceptional business factors in play. A default charge is not fair simply because it is below £12. Setting a threshold for intervention is a pragmatic pro-consumer action that is designed to give the industry the opportunity to change its practice without litigation. It is supported by detailed guidance to the industry as to how to reduce the likelihood of public enforcement (see note 2).

A default charge should only be used to recover certain limited administrative costs. These may include postage and stationery costs and staff costs and also a proportionate share of the costs of maintaining premises and IT systems necessary to deal with defaults 

Only a court can finally decide whether a charge is unfair or not. The OFT has today set out a statement of its view of the law. This has not generally been accepted by most of the eight credit card issuers... "

I said I would add evidence to the BBC article about the OFT starting point over bank charges. In that first item I have highlighted, you will find it.

Please also note for later consideration, they say that the principles they are applying to credit card charges, will also apply to bank overdrafts, store cards and more importantly - mortgages.  That takes us back to the importance of the Concordats that I have emphasised earlier.

Note also the reconfirmation of how the OFT view the "fairness" of charges - related to its price when set against allowable administrative charges.

Lastly, please note that last item, where the OFT accept that it is eventually only a court which can decide on what is fair or not.

That was the starting point, a set of principles, not a court decision, and with, for me, a narrow interpretation of how fairness or otherwise of charges should be determined.

You can find further evidence for the OFT's position via the press release link, namely a guide "Calculating fair default charges in credit card contracts" and a "guide for consumers".

At this juncture it is worth reminding you that the eventual Supreme Court decision did not rule on whether the OFT were correct in their views, they ruled on whether the OFT had the right under UTCCR to even investigate the issue of charges, and ruled that the OFT had no such right..

That is a big difference, from where the OFT started and where it ended, one which to this day has left the issue of fairness over bank charges unresolved.

In my next posts I will offer evidence of how the issues over charges have been addressed by the FSA, and you will see I believe another big difference.

One which leads to this:

Let's ask Lord Turner and the FSA this very simple question:

Do you believe that the charges levied by Banks on their customers were and are fair or unfair?

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(Author's note - please accept my apologies if those links do not appear to work, and that the text font varies - it may be me, but the blog software seems to be acting up???)

Issues being argued over elsewhere - Supplementary.

I have broken from the series of posts I had intended -  to add this "supplementary" post.  I made reference earlier to some of the web sites and forums (nope, I know its fora - but it just doesn't sound right to me when I use fora even if it is correct).

One of those, perhaps the most visited in the UK is Money Saving Expert (MSE) - and whilst I am not allowed to post a direct link to the existence of this blog there - under their forum rules- I am taking part in the debate (*) which surrounds this subject of bank charges.

The issue of the use of UTCCR, the legislation used by the OFT in the court cases, and which the Supreme Court ruled against, is part of an ongoing debate, and it is an important part of the whole debate - but in my view a dead end.

To justify that belief, this is a post I made on MSE, it is supplementary to the blog series I intend (these will resume in my next posts), but it has an overall importance, so for the record and to allow those who may not access MSE::

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Reference to the applicability or not of the UTCCR to this question over bank charges has predominated throughout the whole period and I want to attempt to both open and then close reference to the use of UTCCR (as far as I am concerned) as the way to resolve the issue of bank charges - because for me it is a dead end.

It is not possible to write a blog without it containing the opinions of the person writing it, and there is nothing whatsoever wrong with that, but in itself it is just opinions, and that is why I have laid emphasis on presenting "evidence" that support those opinions, and it is then up to those to see whether that "evidence" leads them to the same conclusions as I have.

Referring to the UTCCR as above is very much a case in point, and whilst I agree with the comment made by Alpine Star, I want to offer evidence for that comment, not just opinion, not least in order to justify my comment that it is a dead end, a route to nowhere.

Nor is that only applicable to the OFT who chose that route to ask whether they had the power to challenge the fairness of bank charges, it is equally true for the FSA, so when you hear me make reference to the FSA as the road to travel, that is true, but it has nothing to do with the UTCCR.

Let me explain, using this evidence of the FSA's equal involvement in the use of the UTCCR - and then show why it would also be a dead end if we went that way.

This is an example of the FSA using the UTCCR:
As a qualifying body under the Unfair Terms in Consumer Contracts Regulations 1999 (the Regulations) we can challenge firms that are using terms which we consider unfair. We review contract terms referred to us by, among others, consumers, enforcement bodies and consumer organisations. Our review of terms and conditions used in the RBS Group has led to The Royal Bank of Scotland plc, National Westminster Bank plc, Ulster Bank Limited,Coutts & Co and Adam & Company plc undertaking not to use certain terms that we consider unfair.

Under the Regulations we must notify the Office of Fair Trading (OFT) of the undertakings we receive. The OFT has a duty to publish details of these undertakings, which then appear on its Consumer Regulation website. We also publish a notice of these undertakings on our website. Both publications name the firms, identify the specific terms and explain why we thought they were unfair under the Regulations.

Even if firms have not given an undertaking or been subject to a court decision under the Regulations, they should remain alert to undertakings or court decisions concerning other firms as part of their risk management. These will be of potential value in showing the likely attitude of the courts, the FSA, the OFT or other qualifying bodies to similar terms or terms with a similar effect. Ultimately only a court can determine the fairness of a term and, therefore, we do not recommend terms that have been revised by a firm to address our concerns as being definitely fair. 

Source ( and full details) here:
http://www.fsa.gov.uk/pubs/other/rbs_undertaking.pdf

Amongst the evidence, this is perhaps the best example of the FSA using UTCCR, for a number of reasons:

1: It clearly involves the UTCCR.

2: It involves the FSA, and establishes that the OFT were not the only regulator who could raise issues addressed by the UTCCR, so too can the FSA.

3: It offers the evidence that the final resolution of any issues under UTCCR can only be reached in a court of law -as Alpine Star has said.

4: It involves banks, and the terms used by banks.

5: It demonstrates the relationship between the FSA and the OFT, that leads to the importance of the Concordats that they have set up between them - an aspect of great importance dealt with in the blog. Why is it important? In this instance (given my earlier comments about starting points) note that the FSA, not the OFT, are described as the Lead Organisation.

However, am I in any way drawing a conclusion from that evidence, that the FSA, given their position to deploy the powers under the UTCCR in like manner to the OFT were the starting point for the court actions over overdraft charges? An absolute and emphatic - No!

We have already established via evidence that the FSA were not empowered to regulate overdrafts, that fell to the OFT. Equally, it did not ultimately matter, because the Supreme Court ruling is explicit, and would have applied whichever body had taken the lead.

However, and it is a big however, let's repeat exactly what the SC made explicit.

From the Press Summary the SC issued:
http://www.supremecourt.gov.uk/decid...essSummary.pdf

- this was made explicit:
This appeal involved a relatively narrow issue. The Supreme Court had to decide not whether the banks’ charges for unauthorised overdrafts were fair but whether the OFT could launch an investigation into whether they were fair.

That, for me, is final, but it has two parts.

First, that the route to determining fairness over bank charges is not to follow the road sign marked UTCCR, it is a dead end, leading nowhere - the SC has ruled on that.

But second, the SC has made it abundantly clear (I personally don't think they could have made it any clearer) that it has not ruled on the fairness of charges.

Indeed, if you read the full judgement of the SC
http://www.supremecourt.gov.uk/decid...0_Judgment.pdf

- you will find additional evidence that, using the UTCCR leads to a dead end, but - that it is not by any means the end of the issue of the fairness or otherwise of bank charges - and that is not my opinion, it is clear for me from the comments drawn from the highest court in the UK:
LORD WALKER 

It is therefore appropriate to spell out at the outset that the Court does not have the task of deciding whether the system of charging personal current account customers adopted by United Kingdom banks is fair.

Some would regard the United Kingdom system as being, in some sense at least, obviously unfair, though Mr Sumption QC (for the banks) vigorously disputed Lord Mance’s suggestion that his clients were engaged in a sort of “reverse Robin Hood exercise”. That is an imponderable question which depends partly on whether one’s perception of the average customer who incurs unauthorised overdraft charges is that he is spendthrift and improvident, or that she is disadvantaged and finding it hard to make ends meet. But it is not the question for the Court.

If the Court allows this appeal the outcome may cause great disappointment and indeed dismay to a very large number of bank customers who feel that they have been subjected to unfairly high charges in respect of unauthorised overdrafts. But this decision is not the end of the matter, as Lord Phillips explains in his judgment.

Moreover Ministers and Parliament may wish to consider the matter further. They decided, in an era of socalled “light-touch” regulation, to transpose the Directive as it stood rather than to confer the higher degree of consumer protection afforded by the national laws of some other member states. Parliament may wish to consider whether to revisit that decision. 
LORD PHILLIPS

Thus the issue of whether or not the Relevant Charges form part of the “price or remuneration, as against the goods or services supplied in exchange” within Regulation 6(2) is not necessarily academic. No attack has yet been made, however, on the level of the Banks’ charges overall.
LADY HALE

... is the real problem that we do not have a real choice because the suppliers all offer much the same product and do not compete on some of their terms? This is the situation here. But it is not clear to me whether the proper solution is to find some way of forcing the suppliers to compete with one another in the terms they offer or whether the solution is to condemn one particular model of charging for those services. Fortunately, however, that is for Parliament and not for this Court. 

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I will allow you to form your own conclusions, but if using the UTCCR is closed, and for me it is a complete dead end - does that mean that there are no other ways of resolving this issue? For me the answer is that there are, and as is known to both MSE Guy and Mike Dailly, I formed that conclusion before the SC ruled.

What those extracts show is that Parliament is involved, and that will take us to what the political parties said about bank charges being fair or unfair - which I will address in the blog, they are important in all of this.

But, for me, the more important and outstanding question is this - which body, other than the OFT, was already empowered by Parliament - at law - both to regulate the banks, and in addition empowered - equally at law - to secure as one of its main objectives - consumer protection - securing the appropriate degree of protection for consumers?

Answer - the Financial Services Authority.

Extract:
We are a statutory body set up under the Financial Services and Markets Act 2000 (FSMA). FSMA sets out our four statutory objectives, which are supported by a set of principles of good regulation that we must have regard to when discharging our functions.

From here:
http://www.fsa.gov.uk/pages/About/Ai...ry/index.shtml

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The next posts in the blog will offer evidence of :

1) how the FSA address issues of fairness

2) why I believe the FSA are the way to resolve this issue over bank charges, and why they are already empowered by Parliament to do so

3) why, after providing the evidence for both those points, we are left with only one very simple question, namely:
Let's ask Lord Turner and the FSA this very simple question:

Do you believe that the charges levied by Banks on their customers were and are fair or unfair?

I will post extracts as those posts are made.

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(*) Link to the debate on MSE.

The FSA - v- The OFT - Part 1

I have to cover a fair amount of evidence in this next set of posts, so I have divided it into parts to reduce the amount that has to be read at one sitting.  However, it is my intention, as best I am able, to link each part so that eventually the parts form a whole, and in a manner that is continuous.

Essentially, I intend to compare and contrast the roles of the OFT and the FSA as regulators, and also illustrate not only where those roles combine, but where by not combining they leave a gap, one into which this issue of the fairness over bank charges fell, and where it still lies fallen.

A constant challenge, of which I am only too well aware, is that many of you reading this blog will say "so what"?  "Why bother"? "The FSA have no regulatory jurisdiction when it comes to overdrafts and unauthorised overdraft charges."

Now, that is true and I offer no disagreement to that being true.  However whenever any one of us is asked to appear in court, we are not solely asked just to tell the truth.  Wisely, and with very good reason, we are asked to declare that we will tell the truth, the whole truth and nothing but the truth.

The evidence I will present in the following parts, in sequence, will address the issue of the fairness of bank charges by adopting that wider measure of judgement.  That is precisely why I have broken it down into consecutive parts - to illustrate what, for me,takes us closer to the whole truth.  Whether you agree after you have reviewed the evidence is up to you - you are the jury.

So, in the FSA v The OFT - let's start here:

It's an old well worn joke, so I expect you may know it. It involves a stranger asking for directions, to be told that “if that is where you want to go, I wouldn't start from here!”

For me, that answer applies very strongly to this issue of bank charges.  If we want to find an answer to whether bank charges are fair of unfair, if that is our ultimate destination, maybe we have to be very selective, very selective indeed, in our starting point.

For very understandable reasons, the vast majority of people saw that starting point as the OFT, indeed as court case followed court case that starting point seemed more and more secure, until it hit the buffers at the Supreme Court.  So was it the wrong starting point?

That belief in the powers and abilities of the OFT to resolve issues over charges and their fairness or otherwise, can probably be traced back to 2006 and the action the OFT took over credit card charges.

These are extracts from a BBC article in May 2006:

"The OFT said that in the future, credit card late repayment charges in excess of £12 would be considered unfair and likely to be challenged in the courts.


Charges, the regulator argued, "should only reflect the administrative costs of dealing with the default".


Not all that dramatic a statement, perhaps, when applied to just the credit card industry.


But when the OFT said the same principle would also apply to default charges on overdrafts, you could almost hear the gasps from UK's banks and building societies."

That for me was the starting point of the journey that led eventually to the Supreme Court decision some 3 years later.


You don't need me to tell you that when you programme a sat-nav with a destination you want to reach, if you insert the wrong starting point, you won't get there - ever. 

Is that what happened over the issue of the fairness of bank charges? We used, (not in any way unreasonably on the face of it) the OFT as our starting point, and after 3 years, after 3 expensive Court appearances, we found we had NOT arrived at the destination we wanted to reach - a decision on the fairness of bank charges.

Let's retrace our steps, back up and go back to 2006, starting, I suggest here: a speech by Jonathan May, Executive Director, Policy and Strategy, Office of Fair Trading.  It was a speech given to the British Bankers Association in November 2006.

The highlighted link will take you to the full speech, but for now I want to ask you to reflect on these extracts:

- setting unfair standard terms and conditions knowing that consumers are very unlikely to read and take on board all the detail contained in the small print. This is where our recent work on default charges comes in, to protect consumers from unfair penalties that recover more than the cost of dealing with a default.

- Our work on credit card default charges found that more than £300 million was being earned through unlawful penalty charges.  Credit card issuers have agreed to reduce default charges, the majority by almost half.

Note please the use of the word unlawful, and more importantly the words penalty/penalties.

To claim something is unlawful is one thing, to establish it as fact requires that it be taken to a court of law.

The resolution of the issues over credit card charges was not decided in a court of law - it was decided in an agreement by the card companies with the OFT, so unlike the Supreme Court decision over bank charges it is not essentially the truth, the whole truth and nothing but the truth to use the word unlawful - simply because it was not decided in a court of law. It is a belief, an assertion, until a court decides.

That important distinction on the issue of credit card charges being unlawful, is well recognised by many, including Martin Lewis in the MSE Credit Card Charges - Reclaiming Guide - which has this comment in its opening remarks:

" In 2006, the Office of Fair Trading ruled these charges of up to £35 were unfair, and many believe they’re actually unlawful."

I have little doubt that the OFT sincerely believed in the use of the word unlawful, and that belief, in my opinion, prompted them to take on the issue of bank charges.

However it was a belief that had never been tested in a court of law, until the grounds put forward by the OFT for that untested belief were put to their ultimate test in the Supreme Court. You know the result.

This is the full judgement of the Supreme Court, all 40 odd pages.  I will let you read it for yourself, if you have not already done so, but what I want to target now is the word "penalty". 

Why? Because in the evidence given to the Supreme Court on behalf of the banks, it was something they knew had a very great importance, and that it went beyond the bounds of the ruling the Supreme Court might finally give over the main subject under debate, namely the provisions and applicability of the UTCCR (Unfair Terms in Consumer Contracts Regulations).

These extracts from the Supreme Court ruling will, I hope, explain  the importance of what is or is not a penalty - not directly related to the UTCCR, but its importance at common law:

"The banks, in order to obtain a more comprehensive answer covering related issues raised in individual claims, counterclaimed not only for declarations to the opposite effect to those sought by the OFT (including an express declaration as to plain and intelligible language) but also for further declarations that their Relevant Terms were not capable of amounting to a penalty at common law


that none of the terms amounted to the imposition of a common law penalty

Andrew Smith J considered at paragraphs 295 to 324 whether the Relevant  Charges were penalties at common law so as to be unenforceable for that reason. He held that they were not because a penalty at common law is a payment that becomes payable upon a breach of contract. Liability to pay Relevant Charges is not contingent upon breaches by the customers of their contracts.

Those extracts come from a Court of Law, the debates over their importance form part of a Court ruling, a ruling of the Supreme Court in the UK.

For me they confirm why - despite the sincerity of the belief held by the OFT, namely that the charges were unlawful and penalties - we eventually arrived at a legal decision which did not support those beliefs. For me they confirm why the legally untested beliefs and assertions of the OFT were the wrong starting point

However I leave you to judge the merits of those comments, and of that evidence - but bear in mind as you do so that you already know the Supreme Court ruling. My comments may not be accepted by you at all, the ruling of the Supreme Court however has to be accepted by us all.

For me, the harder task in the following parts is not to provide evidence that the beliefs of the OFT were the wrong starting point, let's just accept that their best efforts did not get us to our destination.

The mountain I will have to climb is to establish, beyond all reasonable doubt, that the beliefs, the recorded actions,and the regulatory powers of the FSA are not only the better, but the only, starting point to reach the destination we want - an answer as to whether bank charges are fair or unfair.

The following parts in this series will offer the evidence for that view, but for now let's leave the OFT behind and just simply get the FSA involved. Is it true - that they have no part to play in this whole matter?

I referred much earlier to adopting the wider horizon of looking for the truth, the whole truth and nothing but the truth.

I used that phrase against the fact that - the FSA do indeed have no regulatory jurisdiction when it comes to overdrafts and unauthorised overdraft charges. True as that may be - is it however the whole truth and nothing but the truth?

Let's start here -  the agreement signed by all those who decided that there should be a test case to take to court. It involved the OFT, it involved the Banks, and it involved one other party.

This is the agreement dated the  25th July 2007. Do you notice who that other party was to that agreement?

Yep, the FSA!

So, when we say that the FSA had, and has, no regulatory jurisdiction or indeed involvement in this whole matter - is it indeed the whole truth, and nothing but the truth - or is there more to it?

Nor is it that the "more to it", as some may suggest, - is just the FSA's singular regulatory power and regulatory ability to issue the waivers which froze all outstanding claims either at the FOS or in the many courts involved in claims? That power in itself is no small matter, nor was it a minor involvement.

However there is much more to it -what that is, and it implications, will form the start of the evidence in Part 2.

Summary - for anyone new to this blog.

If you are new to this blog, may I first say "Welcome"! A short background review of this blog may be in order.

The blog is designed to offer evidence on the subject of whether bank charges are, and were, fair or unfair.

Many believe that the question has been answered, negatively for those affected by such charges, after a Supreme Court decision against the OFT, or following that decision, that it seems well nigh impossible to obtain an answer.

I believe the exact opposite, I believe an answer is available, a positive one for those affected - but hold that belief because in my opinion the answer lies, and always has lain with the Financial Services Authority.

Am I correct? Many, and they have considerable knowledge and experience in the subject, hold the opinion that I am wrong,  For me however, it is not a question of opinion, but of evidence, and this blog has from its inception sought to provide evidence, through which an answer can be obtained.  Are, and were, bank charges fair or unfair - it remains an open unanswered question.

I set myself four tests - against which to provide the evidence which I believe supports my conclusions.  Whether you form the same conclusions depends on your assessment of the evidence - and yes, sorry that means reading the blog from the start in order to gain an understanding of the evidence in full.

However, to help you decide whether to do so, here are the four tests:

Test 1 - Evidence that the Financial Services Authority regard "Treating Customers Fairly" as fundamental.

Test 2 - Evidence that the Financial Services Authority have failed to meet the statutory obligations imposed on them by Parliament.

Test 3 - Evidence that the Concordat agreed between the Financial Services Authority and the Office of Fair Trading established the basis for real consumer detriment and serious regulatory failings.

Last, but very very far from least ...

Test 4 - Evidence, which must be irrefutable and unequivocal, that the Financial Services Authority expect charges to be a fair reflection of the additional administration costs faced, not a way to increase profits or offset costs from other parts of a business
 

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To date I have covered Tests 1 and 2 as far as I feel is necessary to create the platform upon which Tests 3 and 4 can be presented. 

 

I have more to add to Test 3, and the importance of Concordats between the FSA and the OFT.  But I will do so shortly -  but as integral to Test 4 - which is by far the most crucial test.

 

In my last post I listed a set of extracts taken from FSA documentation.  They form part of Test 4, and in my next post I will provide the links to the source documents.

 

If you have an interest in the question of whether bank charges are, and were, fair or unfair, I hope you will find them of interest. They provide evidence, upon which you can form your own opinion.

 

Is it evidence that is - both irrefutable and unequivocal, that the Financial Services Authority expect charges to be a fair reflection of the additional administration costs faced, not a way to increase profits or offset costs from other parts of a business - the essence of Test 4?

 

.

What evidence exists to show the FSA know what fair is?.

I ended my last post with these comments:

The crucial evidence - eventually - is:

1) to identify, without exception or qualification, the regulatory role of the FSA in the matter, and

2) the FSA's firmly established position on "fairness" when it comes to charges.

In the posts which follow I will offer the evidence against both of those items, and will continue to repeat this:

Let's ask Lord Turner and the FSA this very simple question:


Do you believe that the charges levied by Banks on their customers were and are fair or unfair?

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For reasons which I will explain - in full - later, I intend to offer evidence against item 2) first.

Let me just say for now that in repeating that very simple question to Lord Turner and the FSA throughout this blog, I already know that there is substantial evidence that they have already answered the question in the most fundamental way possible.

Now, that is not true to the extent that is necessary, because the evidence I will submit below relates to the FSA treatment of charges which in themselves do not involve bank charges.  However that qualification equally applies to all those who have any authority to adjudge the fairness or otherwise of the charges levied on customers.

The OFT have not answered the question, Parliament has not answered the question, and the highest Court in the land has not answered the question.  It's not just the FSA - no one has answered the question!

Just in case, let me remind you of two important items which support why I am emphasising, perhaps even over-emphasising, the complete void over an answer to what is a simple question - what is fair?

Firstly this - what Lord Turner once said to the Treasury Select Committee, he said " there was a clear legal decision "on the issue over bank charges.

Secondly this - two extracts from the Press Summary issued by the Supreme Court in November 2009, let's make sure we know (before we go further) exactly what that clear legal decision was:

"This appeal involved a relatively narrow issue. The Supreme Court had to decide not whether the banks’ charges for unauthorised overdrafts were fair but whether the OFT could launch an investigation into whether they were fair.


Lord Walker made clear that the scope of the appeal was limited – the court did not have the task of deciding whether or not the system of charging current account customers was fair, but whether the OFT could challenge the charges as being excessive in relation to the services supplied in exchange (Paragraph 3). As Lord Phillips stated, even if such a challenge was not possible, it might still be open for the OFT to assess the fairness of the charges according to other criteria (Para 61)."

So, please be very clear that the question over whether bank charges are fair or unfair has never had an answer, none, nada, zilch, from anyone (with the legal authority to do so) alive or dead in the entire history of mankind.

I hope this blog will play its part in changing that position, and we do get an answer to a very simple question.

How?  Well there is extensive evidence which can be provided on how the FSA address the question of fairness in respect of charges - and specifically those which arise in an identical manner to bank charges
..
Let's have a look at this evidence, and allow you to form your own opinion.  As you may have surmised I already have my own opinion formed, both emphatically and for quite some time.

For instance, read the following comments, how do they begin to shape your opinion?

" ...a number of serious failings were identified in relation to its dealings with customers. These include ... .excessive and unfair charges for customers that did not reflect administration costs."

" ... The FSA has identified a number of serious failings. These include: Applying charges to customers' accounts that were unfair and/or excessive. These were: A fee for a returned direct debit which was charged regardless of how many times the direct debit had already been returned unpaid."

" ... and applied charges that were unfair because they were charged repeatedly or did not accurately reflect the cost of administering an account in arrears."

''... Firms which fail in their obligations to customers should expect not only a substantial fine but also that they will have to pay back customers who have been disadvantaged by their failings.''

" ... the FSA will take robust action where it sees that customers are not treated fairly. Retail firms which fail in their obligations to customers should expect not only a substantial fine but also that they will have to pay back customers who have been disadvantaged."



" ... The case sets a precedent, with the FSA concluding this investigation in a matter of weeks, and the firm working with the FSA to agree a process to enable customers to receive redress as quickly as possible."

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Those who know this blog well, will know I do not offer extracts without including links to the source.  The opening "highlighted" items above demonstrate that practice. This is my first exception - but it is wholly temporary.

In my next post, I will include the links to the source material for each of those comments.  For now let me just say that they are all comments from the FSA.

I asked how they might begin to allow you shape your opinion. At a minimum I think they may show you that the FSA are no stranger whatsoever to deciding on what is fair or unfair, and in taking appropriate action, when they deem something to be unfair, and what the ingredients that constitute unfairness involve.

Each item (and you will have full access to the items in the next post) involves circumstances where the FSA have dealt with cases that relate to charges. Charges which they declared to be unfair and which resulted in fines for the Companies involved and redress for the clients and customers who were affected.

It is also important to note, as you will see, that not one of those cases involved court action on the part of the FSA.

That stands in stark contrast to the expensive exercise undertaken by the OFT in their attempt to even gain the opportunity to look at whether charges were fair or otherwise - an opportunity eventually denied to them by the Supreme Court.

Am I forgetting item 1)  to identify, without exception or qualification, the regulatory role of the FSA in the matter? 

Nope, not for a second, but first let's firmly establish whether you, just like me, believe (based on evidence drawn from the FSA)  that they have more than sufficient experience to answer this question:

Let's ask Lord Turner and the FSA this very simple question:


Do you believe that the charges levied by Banks on their customers were and are fair or unfair?

Once we establish that position, we can then identify why a question they were legally obliged by Parliament to answer (by virtue of the Financial Services and Markets Act) has not been addressed by them, let alone answered.

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The final evidence ... the blog restarts.

The opinions and evidence presented to date in this blog, and that which is to follow, are I believe now being better understood and recognised by others.

There have been many individuals and bodies involved in the disputes over whether bank charges are fair or not. I wish to identify some of those so involved.

Amongst the consumer forums involved were Legal Beagles and perhaps the wider known site established by Martin Lewis, .Money Saving Expert. Both sites contain vast amounts of detail, opinions, and factual information on this whole subject of bank charges.

Recently on the Money Saving Expert (MSE) site a Guest Comment was offered by Mike Dailly of the Govan Law Centre, an individual heavily involved in the subject, and I intend to restart this blog, with a full extract from Mike Dailly's recent comments.

Both MSE and Mike Dailly have had e-mails from me in the past, and have today been recontacted, and asked to review the current evidence presented in this blog, and that which will follow.

First, let's look at what Mike Dailly has to say:

"Guest Comment: Bank charges fight still alive

Mike Dailly

Govan Law Centre

20 May 2011


Bank charges reclaiming has largely fallen off the radar after the banks' 2009 Supreme Court victory. But Mike Dailly (right), principal solicitor at Govan Law Centre, thinks the fight is still on.


Overdraft charges are fair and beyond challenge, according to the banks.


Of course, history is written by the victor, and when the Office of Fair Trading lost its test case against the banks in November 2009, UK consumers were wrong-footed.


The momentum in our campaign for fairness and transparency was lost even though the Supreme Court said overdraft charges could still be challenged under a different rule, the Unfair Terms in Consumer Contract Regulations (UTCCR).


This aims to ensure contract terms are indeed fair. So where are we now on unfair bank charges?


Little has changed. The banks still extract over £2 billion each year from vulnerable consumers in overdraft charges.


Some banks have introduced daily fees for going overdrawn without permission, but for many consumers in financial difficulty this makes little or no difference.


Legal challenge


Our legal team identified powerful arguments to challenge overdraft charges using different powers under the Consumer Credit Act (CCA).


Govan Law Centre will be debating these in court in August, but in truth these provisions are highly technical and what we really need is a simple, no nonsense solution.


Last month's High Court defeat of banks on mis-selling payment protection insurance (PPI) may present the catalyst for change that consumers having been waiting for.


This case clarified the precise status of the Financial Services Authority's (FSA) rules. So what does this mean in practice?


Two of the FSA rules which came into force in November 2009, under banking regulations, are potentially powerful.


One requires the bank's service to an individual customer to be 'fair', and the other requires 'appropriate information' about the service to be provided.


The strength of these rules is they are general principles – unlike the rigid UTCCR or CCA – so there is less scope for expensive lawyers to argue how many angels can dance on the head of a pin.


What is 'fair'?


If we consider 'fairness', banks have practically admitted in the bank charges case that a single overdraft charge is not fair to an individual customer.


That is because the price does not reflect the cost to them of the unauthorised overdraft transaction.


Instead, it helps subsidise customers who are always in credit and therefore pay no fees. And the customer who has to pay is often skint.


All of this means we can once again talk about the price of overdraft charges, and whether the cost is fair and proportionate to the consumer.


The Supreme Court said you couldn't do this with the UTCCR, but you can with the FSA rules. That is a radical and exciting proposition.


Banks change their story


On the subject of 'appropriate information', we must not forget the banks' complete lack of transparency.


In 2005, they told the House of Commons Treasury Committee bank charges were "going to pay for all the people we have who pursue debt, collect debt, speak to customers and chase payments". That wasn't true.


Nor was it true when the British Bankers Association told us in 2006 that every time a transaction was declined there was a bank employee sitting in an office looking through a customer's file and deciding what to do.


In 2007, the banks then claimed overdraft charges were a fee for an informal overdraft.


The truth only came out in the OFT's case, and most banks have still failed to communicate this. They admitted the charges are indeed used to subsidise other customers.


The fight for a fair and transparent bank charging structure is far from over. I believe hope is on the horizon. Watch this space."

Views expressed are not necessarily those of MoneySavingExpert.com

Taken from here: http://www.moneysavingexpert.com/news/reclaim/2011/05/guest-comment-bank-charges-fight-still-alive

Mike Dailly says " .... what we really need is a simple, no nonsense solution."

Mike Dailly has realised that the answer to this whole issue of "fairness" over bank charges may lie with the FSA, which the readers of this blog will realise has been the contention of this blog from the outset.

Be that as it may, proven as it can be, simple it isn't.

I believe, and always have believed, we need to go one step further than Mike Dailly, we also need hard factual evidence to elicit a solution - providing that very evidence is, and always has been the purpose of this blog.

The crucial evidence - eventually - is:

1) to identify, without exception or qualification, the regulatory role of the FSA in the matter, and

2) the FSA's firmly established position on "fairness" when it comes to charges.

In the posts which follow I will offer the evidence against both of those items, and will continue to repeat this::

Let's ask Lord Turner and the FSA this very simple question:


Do you believe that the charges levied by Banks on their customers were and are fair or unfair?

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An explanation ...

Why did I stall this blog last October?

Brief explanation - I delayed further posts because reports and consultations were being issued by the FSA, by the Treasury Select Committe, and by HM Treasury, and perhaps most importantly a report from the Independent Commission on Banking is now due - early next week.

All of these reports have a direct bearing on what I want to say to conclude the evidence I am presenting, and it was better to delay further comment rather than speculate on what they might contain.

However, whilst the blog was stalled, my correspondence with the FSA, the OFT, the Treasury Select Committee, and the Independen Commission on Banking has in no way stalled, those have continued - and will probably form part of the further evidence to be presented.

This blog will recommence shortly.


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