ARTICLE...
The End of the Matter?
Seven banks and a building society tasted success on 25 November with their much-publicised Supreme Court bank charges appeal. However, in the process, did their opponents land a killer blow?
The trial focused on the High Court and Court of Appeal rulings relating to whether the OFT could – in accordance with the provisions of the Unfair Terms in Consumer Contract Regulations 1999. The Regulations challenge the fairness of unauthorised overdraft charges levied on current account customers as excessive.
Appealing against the judgements, the banks stated these charges couldn't be challenged by virtue of Regulation 6(2). This point deals with whether the charges 'constitute the price or remuneration as against the services supplied in exchange'.
Both courts concluded the bank charges did not qualify within the regulations, but for different reasons.
The Court of Appeal held the substance of a current account contract should be analysed as a package. It went on to divide the package into the 'core and essential bargain' and provisions that were 'incidental or ancillary' – stating that Regulation 6(2) only applied to the former element. Therefore the charges were not part of the 'core and essential bargain' and did not fall within the regulation.
The High Court held the charges were not covered by Regulation 6(2) because they were not 'price or remuneration' for 'services in exchange'. They were not in exchange for anything.
The Supreme Court, in allowing the appeal, held that Regulation 6(2) did deal with the give and take of any consumer contract. In essence, the consumer pays a price for the current account services it receives.
It also agreed a current account package includes a raft of services. However, Regulation 6(2) does not provide a basis for any court to decide that some are more important than others to the contract. Therefore it suggested a court cannot decide which elements of the price or remuneration payable are 'essential'.
The Supreme Court also saw no justification in excluding from the application of Regulation 6(2) price or remuneration on the grounds that it is 'ancillary or incidental'. Therefore those charges are part of the price paid by customers in exchange for the package of services they receive. This would fall within the scope of Regulation 6(2).
But sadly this doesn't necessarily mean the worry is over. When the matter was before the High Court, the banks argued that a term of contract provided the 'price or remuneration' for 'goods or services supplied' was exempt by virtue of Regulation 6(2).
However, the High Court disagreed. It stated that the regulation precluded assessing a price term for fairness by reference to its adequacy as payment for the services provided in exchange. However, it did not preclude assessing a price term for fairness according to other criteria.
So the door is still open to OFT's investigations. The charges will still be open to attack on the ground that they are 'unfair' as defined by Regulation 5(1) of the Regulations, but that attack cannot be founded on an allegation the charges are excessive by comparison with the service they receive.
Original article, by Joanne Davis of Shoosmiths, courtesy of CSA.
