Bank Charges - Test 3. Post 8.

... continued.

A quick reminder of where we are: 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.

As I showed in an earlier post, there have been a series of so called Concordats between the Financial Services Authority and the Office of Fair Trading - what I described as a blizzard of agreements. For the purpose of providing evidence that they established the basis for real consumer detriment and serious regulatory failings, I am using just one document from the myriad of documents involved, this one: Memorandum of Understanding. It contains not just one but four Concordats - if, you need more details they are all listed in an earlier post.

Now it could be argued, why choose that one, why not set my opinions against each and every similar document that has ever existed?  The most obvious reason might seem to be that neither you nor I could stand the mental pain.  The less obvious reason is that it is not necessary - each and every one of those agreements, those Memoranda of Understanding, those Concordats all contain the identical elements that formed the basis for consumer detriment and the regulatory failings which prompted that detriment. Let me show you why - in a step by step approach.

First, let me remind you of evidence from an earlier post, it was a comment from Lord Turner, Chairman of the Financial Services Authority given in evidence to the Treasury Select Committee (See earlier post here:  Bank Charges - Item 1 - Lodged into evidence.)

What Lord Turner said as part of his evidence was " ... if somebody goes from being £5 in credit to £5 in debit, at the moment, the way in which the law works, the responsibility for making sure that the terms and conditions are reasonably explained et cetera switches from us to the OFT and that clearly is a boundary which is not all that clear.

Does that comment make you wonder why after nearly a decade of agreements, memoranda of understanding, and Concordats, not even Lord Turner can explain who is doing what and when?  Does it also make you begin to notice, that according to Lord Turner, there are at least three possibilities involved - Bank Accounts which have at the outset a positive value (+£5.00), those which at the outset have a negative value (-£5.00), and a potentially vast grey area in between which - please note and remember - he just cannot explain.

Nor may I remind you is he alone in not being able to explain whether it is the FSA who are responsible or whether it is the OFT.  Again, bear in mind this extract from a speech given by Adam Phillips, Chairman of the Financial Services - Consumer Panel. (See earlier post here - Bank Charges - Test 3. Post 5.)

These comments from Adam Phillips form part of that speech:

" ... The complex regulatory environment builds in inefficiency for firms and it results in confusion and inconsistent treatment for customers ..."


" ... The respective roles of the FSA and OFT need to be clarified. Both organisations are trying to work together to provide a joined up consumer experience, and much alignment can be achieved by rule making under FSMA, but the underlying legislation does not make this easy... "
 
Neither the comments from Lord Turner nor from Adam Phillips came early in the near decade of agreements between the FSA and the OFT, both are comments made in 2009 - and both are clear evidence in my opinion that it is not just consumers who may be confused, it is the regulators themselves - over who does what and when.
 
Just at this juncture however, please note and remember one smaller extract from the speech by Adam Phillips above: " ... much alignment can be achieved by rule making under FSMA". It has an importance which I will address in much greater detail later, but for now, for those who have a detailed background knowledge of this issue over Bank charges, ask yourself who it was that issued "the Waiver", which played such an important part in the proceedings over this issue.  Was it the FSA or was it the OFT?
 
Earlier I promised to reduce the pain that might be involved in examining the multitudes of OFT/FSA agreements, Memoranda of Understanding and Concordats, but now is the time to make a start on the Memorandum of Understanding mentioned above, and its four constituent Concordats. We need to do that (step by step) to see where Lord Turner's unclear boundaries and Adam Phillips' inconsistent treatment for customers exist - and why they led to serious regulatory failure and consumer detriment..
 
This is what we are examining.  I am choosing extracts, in this step by step approach. We start with - UTCCRs.
 
Most of those familiar with the issues over Bank charges will know that the OFT wanted to look at the fairness or otherwise of Bank charges under a specific item of legislation, a derivative of an EU Directive, and called the Unfair Terms in Consumer Contracts Regulations 1999 (UTCCRs).  The eventual Supreme Court decision ruled that the OFT did not have the right to do so, under that legislation, but also clearly noted that the OFT had other avenues they could use over such issues. The OFT decided to throw in the towel and not use any other avenues - leaving the issue of bank charges being fair or unfair - unanswered..
 
The OFT wanted to use their powers under the UTCCRs - but let's also look at where the FSA stood in terms of the UTCCRs.  Did the FSA have any role to play? Did they when they took over control of matters previously addressed under the Banking Code, on the 1st of November 2009 and in advance of any Supreme Court ruling?  Did they have a part to play after the OFT decided it had had enough?  You will find the legal powers of the FSA here
 
Included within those legal powers, you will find this:
 
Unfair Terms in Consumer Contracts Regulations 1999
We may seek an injunction to prevent the use of a contract term drawn up for general use in a financial services contract that appears to us to be unfair as described in the regulations.

I know there are those following this blog who may, because of their deep knowledge of the subject,  just at this point jump ahead and tell me that we have a Supreme Court decision on the application of the UTCCR.  Don't, please, make that jump in conclusions, where you may assume we are heading may not prove to be where we are heading.  Not least because I am not asking Lord Turner or the FSA about their powers or lack of powers under the UTCCRs. I am asking a much simpler question, just this, and no more:

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?

It is a very simple question. 

Plain common sense dictates that until Lord Turner and the FSA answer that simple question, nothing else follows - no matter what legislation may or may not apply.

Plain common sense dictates also that we do not yet need to become bogged down or confused over territorial claims between the FSA and the OFT - we just need one very simple answer to one very simple question from Lord Turner and the FSA.

That has to be our starting point. Not least, because as I indicated above, Lord Turner has stated in evidence, that the FSA does have a role to play in this issue. He may not have been able to explain the precise nature of that role (more's the pity) but he clearly identified to the Treasury Select Committee that the FSA had their part to play, didn't he?

Enough pain for now, I think.  Let's sum up this very simple point - both the OFT and the FSA had, and still retain powers under the UTCCR's.

In my next post I will examine which other powers they shared, and how these were addressed in the Concordats.

More importantly I will shortly look at which powers they did NOT share. The answer to that is what prompted my earlier question - Who was it that issued "the Waiver", which played such an important part in the proceedings over this issue. Was it the FSA or was it the OFT? 

And as a supplementary to that question - if those of you reading this want to jump ahead slightly - ask yourself what item of legislation empowered the issue of that "Waiver"?

Was it a legal power that the FSA and the OFT shared?  Was it for instance a power granted to the FSA under the UTCCRs? Or was it something entirely different - a power only the FSA had?

One that had nothing to do with UTCCRs, and therefore not in any way affected by the eventual Supreme Court decision - then - or as importantly now, today? It's an interesting question.

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