3. WHAT THE RULING MEANS FOR THE OFT - the way
ahead
Appeal to the ECJ (no prospects)
There is no automatic right of appeal to the European Court of
Justice - the Supreme Court may refer a matter to the ECJ for
clarification on a point of community law, but this is
discretionary. The Supreme Court has decided that there is no need
to refer the matter in this case, and it is not possible to
challenge this decision.
Penalty clauses (no prospects)
It has already been decided by the High Court that the fees
charged by the bank are not unenforceable penalty clauses at common
law. This is because a penalty clause is activated where the
consumer breaches his contract. The fees charged by the bank
represent charges for the exercise of rights under the contract,
not penalties for breaching that contract. This decision was not
overturned on appeal.
Challenging the fairness of the charges
(possible)
The OFT is entitled to argue that overdraft fees are unfair on
some grounds other than that they are excessive or
disproportionate, and could bring a new challenge to this
effect.
However the OFT does not have the power to decide what a fair
charge is or to impose a blanket decision in this regard.
Referral to the competition commission (our pick to
win)
As overdraft fees represent a price paid for a service, the OFT
could still attempt to control the level of these fees by arguing
that the banks are engaging in anti-competitive practices and
keeping them artificially high when they should be competing to
have the lowest charges. A finding against the banks could
potentially result in FSA enforcement action and fines running to
hundreds of millions, if not billions of pounds.
Even the threat of this may make the banks nervous, and it is
likely that in order to avoid this they will at least consider some
sort of deal with the OFT in respect of a 'fair' future level of
charges and partial refunds of past charges to bring them in line
with this new fee.#
Claims Financial
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