Barclays Lead Charges Defence

by Stewart Douglas

Story link: Barclays Lead Charges Defence

Retail bank Barclays has today fought back in the high profile bank charges test case with what it described as “throwing down the gauntlet” in order to establish the law relating to the penalties levied against customers straying into their overdraft without permission.

Its argument, lead by representing QC Iain Milligan from 20 Essex Street Chambers in London holds that the consumer regulations cannot possibly be used in connection with bank charges because the charges represent the cost of running current account services.

Following on from the initial arguments lead by RBS representatives, Milligan said that it was not the court’s business to decide how banks should fund their current account services, which were not paid for generally by retail bank customers but by those that stray into the red without prior authorisation.

Were this found to be the case, the Unfair Contract Terms Act arguments of the OFT would fall on the basis that the charges would be considered merely part of the cost of the service, rather than an unfair penalty or an excessive charge beyond the administrative costs incurred by the breach of contract initiated by the customer.

Furthermore it was added that the full extent of the obligations on Barclays side of the current account contract were met for by a full set of charges corresponding on the other side of the table, and to interfere with the pricing policies, albeit borne through contractual breach, would be unlawful and certainly outwith the terms of the Unfair Contract legislation.

It is submitted that whilst the case for bank charges may have got off to a good start, there are a number of fundamental flaws such that the defending banks may have to somehow add further weight to their case to survive judgement.