Presenter: PAUL LEWIS


TRANSMISSION: 2nd JUNE 2007 12.00-12.30 RADIO 4


LEWIS: Hello. In today’s 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. It’s June, so Bob

Howard’s been thinking of Christmas.


HOWARD:The government wants people to know how to keep their Christmas savings

safe, but some Farepak customers aren’t convinced.


BILL:They’ve done this too late and it really has put people off. It’s just a gamble that

people aren’t 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 they’re 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 shouldn’t 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 what’s going on.


LEWIS: Dave’s 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. They’re perfectly

entitled to take contrary views until such time as a superior court hands down a decision

which makes the position clear. I’m not happy about it and I don’t suppose that many of

my colleagues are happy about it because there isn’t 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 it’s 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

higher court.


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 don’t want to comment on what the motives are, but it’s 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 hasn’t 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 they’re all aware that this is a matter that needs to be

resolved as quickly as possible. I don’t 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:We’re 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 I’m not aware in total, but I do know in my own court we’re 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. It’s clearly a market that has big problems for

consumers and a big lack of trust with the banks. We’re trying to make sure that that’s

better going forward. And I think that’s a big challenge for us, but I think it’s 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 it’s 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 that’s 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, they’re

charges for a service. So they can charge what they like and they’ve been changing their

terms and conditions to make that true, haven’t they?


DAILLY:Well I think it’s fair to say that most banks are still calling their charges default or

penalty charges, so in those cases there’s no doubt it was in favour of the consumer. But

you’re quite right - Lloyds TSB, and more recently Barclays and HSBC, have changed

their terms and conditions to avoid the law. Now what I’d 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 there’s 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 don’t have

the money, you’re 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 TSB’s position which is

that they will charge you £39 as a service for rejecting a payment of a direct debit, I can’t

think of any other service in the world where you’re charged £39 for effectively getting



LEWIS:The strength of your campaign though has been if you claim, you’ll get your

money. Now you can’t be so sure. Won’t that stop people from claiming?


DAILLY:Well again I have to say that in most cases it’s 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 you’re 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, what’s needed to sort this out?


DAILLY:Well clearly, as the judge from London said, we do need a test case and I think

we’re 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 government’s 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, 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.