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Presenter: PAUL LEWIS
TRANSMISSION: 2nd JUNE 2007 12.00-12.30 RADIO 4
LEWIS: Hello. In todays programme, chaos in the courts: a senior judge warns that
claiming back your bank charges is now a lottery. The way investments are sold to us is
going to change. Consumer groups say that will confuse customers. Its June, so Bob
Howards been thinking of Christmas.
HOWARD:The government wants people to know how to keep their Christmas savings
safe, but some Farepak customers arent convinced.
BILL:Theyve done this too late and it really has put people off. Its just a gamble that
people arent willing to take any more.
LEWIS:And buy to let landlords are warned to check their tax.
Regular listeners will know that over the past year tens of thousands of bank customers
have successfully reclaimed overdraft charges arguing theyre illegal. It seemed a oneway
bet, but not any more. This week a judge in Hull wrote to twenty customers warning
he would throw out their claims, which he said had no reasonable prospect of success.
He quoted a decision in Birmingham, which we reported on a couple of weeks ago,
where the judge said the law was in fact on the side of the banks. Dave is one of the
people in Hull who received the letter. He was claiming back charges of £1,294 from
HSBC. He feels the letter shouldnt have been sent.
DAVE: Well I was actually frustrated at the fact that Hull court had actually quoted the
Lloyds TSB court case, whereas each individual case should actually be taken on its own
merit. Most people who are actually taking the banks to court, the banks are either settled
out of court or just on the day before the court hearing. If Hull is going to take it upon
itself to do this, the other courts throughout the UK will take it up. Therefore something
should be set through government to say whats going on.
LEWIS: Daves frustration is shared by many judges. Judge Stephen Gerlis speaks for
district judges in London.
GERLIS:The problem is judges are taking different views - some judges are supporting
the banks view; some judges are supporting the customers view. Theyre perfectly
entitled to take contrary views until such time as a superior court hands down a decision
which makes the position clear. Im not happy about it and I dont suppose that many of
my colleagues are happy about it because there isnt any machinery in place when you
have what is an unprecedented situation of mass litigation on this scale for a decision to
be made quickly by an appellate court that would resolve the matter one way or the other.
A lot of people are issuing proceedings. Judges at the same level are making a mixture of
decisions and the matter is becoming something of a lottery.
LEWIS:You say its urgent that this is dealt with by a higher court that will make a
binding decision. Is there any way that you or your fellow judges can get together to
make that happen?
GERLIS:Not within the realms of the present procedure. Normally for a test case to take
place, the parties have to consent that a matter will be taken by way of a test case to a
LEWIS:The banks who could afford it seem reluctant to go to a higher court and the
claimants who might want to find it very expensive to do so.
GERLIS:Well I dont want to comment on what the motives are, but its quite clear that
nobody so far has run off to the appellate court to make a decision; and that includes
cases where customers have lost and where the banks have lost. And indeed when these
cases started in the London area, arrangements were made for a judge to take some test
cases at a higher level than a district judge to reach some sort of definitive decision that
would be helpful to the rest of us. But, unfortunately, because nobody has pursued the
matter further to an appeal, that simply hasnt happened. Obviously once the matter is in
the hands of the appellate courts and a decision is made, that will to a certain extent draw
a line under the whole issue.
LEWIS:If there was an appeal though, would you and your fellow judges be able to
encourage the appellate court to take it quickly?
GERLIS:Well certainly I think theyre all aware that this is a matter that needs to be
resolved as quickly as possible. I dont think the situation has been assisted by the delay
now in the report from the Office of Fair Trading that promised to look into it, which
would have at least given us some guidance as to how these matters should be
LEWIS:Were expecting that at the end of the year. Do you think they should bring that
forward to try and bring some clarity?
LEWIS:Are you aware how many cases there are currently before the courts?
GERLIS:Well Im not aware in total, but I do know in my own court were probably
getting three or four a day.
LEWIS: Three or four a day entering the lottery, if you like.
GERLIS: Yeah, absolutely.
LEWIS: Judge Stephen Gerlis. His call though for the Office of Fair Trading to bring its
report forward is unlikely to be heeded according to its Chief Executive John Fingleton.
FINGLETON: We will obviously look at developments in the courts and we keep a
watching brief on what happens in the court. Our primary focus is trying to get this
market working well for the future. Its clearly a market that has big problems for
consumers and a big lack of trust with the banks. Were trying to make sure that thats
better going forward. And I think thats a big challenge for us, but I think its one that we
want to take the time to get it right rather than rush into it.
LEWIS: Well live now to Glasgow to talk to Mike Dailly, principal solicitor from Govan
Law Centre, who first suggested bank customers should claim back the charges on
Money Box in February last year. Mike Dailly, are you surprised that this judge in Hull
has said he will throw out twenty cases in the light of that earlier decision in
DAILLY:Yes, I believe its wholly inappropriate for the judge at Hull to suggest that cases
be struck out following the Berwick judgement in Birmingham. I think firstly, Paul, we
need to realise that Berwick was decided in an evidential vacuum.
LEWIS:That was the Birmingham case?
DAILLY:That was the Birmingham case where Judge Cooke had no terms of conditions
before him and the case actually fell at that hurdle. What then happened was the judge
went onto look at other matters, which were not really before him, and gave his opinion.
Now thats quite unusual in a case and that means that what the judge had to say was
really speculation. What I would say is that citizens in the UK have got a constitutional
right to access the courts and what the judge in Hull is saying is that effectively you
LEWIS:But at the heart of this is the banks argument that these are not penalties, theyre
charges for a service. So they can charge what they like and theyve been changing their
terms and conditions to make that true, havent they?
DAILLY:Well I think its fair to say that most banks are still calling their charges default or
penalty charges, so in those cases theres no doubt it was in favour of the consumer. But
youre quite right - Lloyds TSB, and more recently Barclays and HSBC, have changed
their terms and conditions to avoid the law. Now what Id say two things quickly about
that is - one, those changes are not retrospective, so obviously if the previous contract
used default then obviously the law is in your favour. The second thing is that calling
something a service or arrangement fee is clearly a sham and theres a lot of case law to
say that that can actually be challenged.
LEWIS:Yes, of course that will have to go before the courts. And presumably the people
who come to you, people often say well why should you go overdrawn; you dont have
the money, youre in fact taking it from the bank. But do these charges really cause
difficulties for people?
DAILLY:They do indeed. I mean if, for example, you take Lloyds TSBs position which is
that they will charge you £39 as a service for rejecting a payment of a direct debit, I cant
think of any other service in the world where youre charged £39 for effectively getting
LEWIS:The strength of your campaign though has been if you claim, youll get your
money. Now you cant be so sure. Wont that stop people from claiming?
DAILLY:Well again I have to say that in most cases its business as usual. Customers need
to continue seeking refunds. They can send a letter; they can do it via the Financial
Ombudsman or the small claims court. But youre quite correct - for those cases where
the banks using the service fee defence, I think what people need to do is to contact the
Consumer Action Group because there they will get free help and support.
LEWIS:And, briefly, whats needed to sort this out?
DAILLY:Well clearly, as the judge from London said, we do need a test case and I think
were getting close to that. Secondly, I think we need to change the unfair terms in
consumer contract regulations to make it clear that a core term, which has got the same
aim or effect of a penalty clause, is covered. Now very quickly, the Council of Europe
passed that very resolution in 1978, so the UK governments already signed up to that.
LEWIS: Mike Dailly, thanks very much. And if you have views on bank charges and
claiming them back, you can have your say on our website, bbc.co.uk/moneybox. And
that invitation we made last week to any chief executive of any high street bank to come
on Money Box to discuss this issue still stands.