Office of Fair Trading v Abbey National and Others (2008)

"Office of Fair Trading v Abbey National plc and Others" (2008) [ [2008] EWHC 875 (Comm); [2008] All ER (D) 349 (Apr); (2008) "The Times" 29th April.] is a ruling upon the so-called 'bank charges' in the United Kingdom. Charges are not exempt from challenges under the Unfair Contract Terms Act 1977 or the Unfair Terms in Consumer Contracts Regulations 1999.

The defence of Abbey National was joined by Barclays Bank, Clydesdale Bank, HBOS, HSBC Bank, Lloyds TSB Bank, Nationwide Building Society and the Royal Bank of Scotland Group.

Background

The movement's beginnings are generally credited to Stephen Hone, a law student from Plymouth, England. Hone requested a refund of charges by Abbey, arguing that under the Unfair Terms in Consumer Contracts Regulations, all penalty charges had to truly reflect the cost of administering them. Hone believed that penalty charges which are higher than their administrative costs are illegal. After filing in small claims court against Abbey, Hone eventually recovered £840 from the bank. He eventually set up a web site [ [http://www.penaltycharges.co.uk/ PenaltyCharges.co.uk] ] to show others how to recover charges, and has set up an Internet-based petition on the web site of the Prime Minister. [ [http://petitions.pm.gov.uk/Penaltycharges/ 10 Downing Street: Petitioning the Prime Minister to bring in new legislation to prevent the current abuse by banks and companys sic in relation to Penalty charges] ]

All litigation against banks was stayed until after this ruling.

The ruling

The ruling applies to: " [U] npaid item charges, paid item charges, overdraft excess charges, and guaranteed paid item charges" [ [2008] All ER (D) 349 (Apr), para 6.]

The banks, engaging 9 Queen's Counsels and 15 other barristers, successfully established that the contractual terms were not penal [ [2008] All ER (D) 349 (Apr), para 449.] and were thus enforceable against the customer unless they fell foul of the Unfair Contract Terms Act 1977 (particularly s6(2)) or the Unfair Terms in Consumer Contracts Regulations 1999.

Much was made by the banks of the clear, intelligable language used in the clauses in question. The judgement concluded that the language used was clear and intelligable in the contracts of HSBC, Lloyds TSB, Nationwide and RBSG; and similarly in the most part for Abbey National, Barclays, Clydesdale and HBOS although lacking in minor detail. [ [2008] All ER (D) 349 (Apr), para 293.]

The banks attempted to establish that the statute is inapplicable to the charges in question. The essence of the argument submitted was that the charges are remuneration for the service provided by the bank (supplying a bank account) and so these particular contractual terms are not severable from the contract as a whole. This argument was rejected by the High Court. [ [2008] All ER (D) 349 (Apr), para 450.]

It is unlikely that the relevant consumer protection law will be stifled by the conclusion of clear and intelligable language. [More material is the bargaining powers, lack of negotiation, the practical consequences and 'good faith'. see further Unfair Contract Terms Act 1977 and Unfair Terms in Consumer Contract Regulations 1999.]

The practical impact of this case is that customers can begin or continue claims against their banks and the lower courts will follow "Office of Fair Trading v Abbey National" and assess the fairness of the clauses.

ee also

* Unfair Contract Terms Act 1977
* Unfair Terms in Consumer Contracts Regulations 1999
* Bank Charges

References