Bank penalty charges: Banks 1 Customers 0?

Question

Today a potential spanner has been thrown in the works with regard to people claiming back their bank penalty charges.

Lloyds TSB today became the first bank to win a court case after being sued by a customer for imposing allegedly unfair overdraft penalty charges. District Judge Cooke, at Birmingham County Court, dismissed a claim for £2,545 from Kevin Berwick, who argued that Lloyds TSB’s charges for having an unauthorised overdraft were illegal contractual penalties.

He said that the Lloyds TSB’s charges were in fact legitimate fees for servicing an account that was overdrawn, and as such were legal.

As this judgment has come from a district judge, it is not binding on any other court, in the way that a High Court judgment might be, which gives some comfort to those of us that are pursuing claims against our banks for penalty charges. However, as the first judgment of any kind in this sort of case, it is a bit of a blow.

Answer 1

Disappointing, but not too concerned. This is the type of case that will find some benefactor who'll pay for appeal proceedings, all the way up to the Lords if necessary.

Re: the points about the business nature of banks and personal financial responsibility;

Totally agree - Many have to take far more personal responsibility for their financial recklessness. Furthermore, all businesses need to make profit in order to flourish - accordingly, they have a perfect right to charge reasonable fees for their non-core services.

The problem is that we have legislation in place to determine the nature of this reasonableness and to prevent dominant parties to contracts wielding undue influence over the weaker parties, i.e. by charging unlawful penalty clauses. The entire issue here revolves around whether the banks in question are abusing their position and imposing such clauses, which are in no way representative of the cost of providing the service, and with are therefore both unreasonable and unlawful. The problem is that, outside of the main banks, some smaller lenders charge a fraction of these unauthorised borrowing costs - evidence that will be taken into consideration in the NatWest case.

Will be very interesting to see what happens with this one, as both parties stand to lose alot.

Answer 2

Hello, (ANS) What most people (banking customers) forget is that having a bank account means you have "a shared relationship" with your bank. Meaning that the bank has a responsability to you the customer but you also have a duty to the bank to NOT abuse the service provided. **To put it simply who is responsible:- The bank is 50% responsible to you & you are 50% responsible to the bank for how you use the service. **This means that when a person has an overdraft facility this is an agreed feature of the account or current account. Its normal that an agreed overdraft facility is charged for at a certain stated rate (the rate is normally in Black & White in the accounts T&C documentation). i.e. you have agreed to the charges when you opened the account all those months or years ago. **Banks do tend to get very upset if you go over your agreed overdraft limit without telling them first, this is because its NOT your own money your using or drawing against. It is in fact the banks own money. Banks are in fact lending you "their money" when you use an overdraft or go over your existing OD limit. The bank is lending their money to you based on the perceived level of risk you represent to them i.e. credit scoring. **Therefore the more you go over the OD limit the higher the fees or penalties they will slap on top as they feel the risk of returning or recovering goes down with increasing debit levels. **Despite what many banks claim, there is No! such thing as free banking. Banks always charge for their services even if the costs are hidden in other ways. **remember Banks are NOT charities they definitely exist ONLY to make a profit from what they do. Anyone thinking otherwise is being naive in my view. Kind Regards from Ivan

Answer 3

I wish people would get it thru their heads that the banks are a business and as such, are there to make money and there's no such things as free banking. If the system is going to change, then it needs to be a change to a system where you pay a fee to maintain your acocunt, not unusual in many other countries.

It costs a lot to deal with an account that goes overdrawn, its not all automated and requires a lot of input to sort things out, so of course this has to be paid for

Answer 4

It will be worth listening to R4 "Moneybox" at 12 midday Saturday, or on Listen Again, or to the Sunday night repeat, as they have also been following this issue for a long time, and no doubt will consider the implications for consumers.

I suppose it also depends on the particulars of the case - so far most of them have not reached court because the banks have made a credit to the customer account and stopped the need for answering in court.

Answer 5

I know the guys taking the banks all the way to court are trying to be valiant, but I was hoping that no-one ever would and let the banks just keep refunding all the customers they've ripped off (myself included (£160 :)))
The banks know that the charges they impose are extortionately excessive but they might just soon find some legal way to retain them... Im happy for them to not want to make the effort or expense to fight those who complain all the way to court ( in these cases the banks offered settlements but were declined). Imagine if these test cases are lost, the banks would gain a moral victory...
Also, to those who say its down to own mismanagement of our accounts and we should be charged: we all dont have piles of money sitting in the bank. Sometimes direct debits get taken when you dont expect, sending the account O/D, or
funds dont clear in time for you to be in the black.

Answer 6

Everyone rips the check into cash places for taking advantage of the poor but I think the banks may be charging overdraft charges. Use to be you would only get up to 2 charges on one check, now they are debiting accounts daily until $ is put in. I think these charges can add up to alot more than the interest rates at some of the check cashing places.

Answer 7

Heres the thing -- the moment you read of the charges included in the fees by the banks overdraft polciy is the moment you should either clal and disable that overdraft protection, or merely bank somewhere else.

Its notlike the charges are hidden, although I will admit, I have been caught by those overdraft fees.
And Bank of America will never again receive my business

Answer 8

Although punitive damages are generally unavailable under contract suits, I can see exactly why this was allowed here. Those aren't "servicing fees" at all. They're punitive fees. Both Britain and the USA have horrid problems with irresponsible citizens and finances. The court is making an economic policy decision here. Basically, they're hoping that by allowing such high fees, it will act as a deterence and make people more financially responsible.

Answer 9

gosh i hope i get my charges back ... district judge cooke has obviously never been slammed by high bank charges .. which have been proven to cost the bank a pittance yet they charge us a super inflated charge ...
I am using a company to obtain mine and am keeping my fingers crossed.Also just to point out some charges are unavoidable and unfair i went 20p over and got a 35.00 charge i am not irressponsible therefore i am claiming my charges back

Answer 10

Yes I heard this.

But surely the score is actually

Banks: 1 Customers 956,027