Receiving a credit card statement showing a charge to an American company one has never heard of, let alone bought anything from, is a hazard of modern living. I sent a polite note back to what was then the Midland Bank, pointing out that this apparent transaction was nothing to do with me. A couple of weeks later the bank replied that customers often overlooked things they had in fact authorised. However, if I was quite sure the errant debit was nothing to do with me, and would sign a form virtually agreeing to sacrifice my first-born if I was wrong, they would condescend to look into it. I must “complete the form immediately as failure to do so may prejudice our ability to assist you”.
Now, excuse me, Midland, I think someone’s got one or two fundamentals a bit wrong here. You’ve paid the money, not me; it’s your problem, not mine. If you want my help in getting it back, I am an accommodating bloke and I don’t mind doing you a favour, but let’s be clear about who’s assisting whom.
Any first-year law student (or at least that minority who stay awake in contract lectures) could paraphrase their learning into a basic proposition: if gullible bank pays money to dodgy retailer, bemused card-holder isn’t liable unless gullible bank can prove some sort of authorisation by card-holder.
I rang the card services centre, more concerned about the underlying jurisprudential philosophy than the $26.85 the Midland was hoping forlornly that I would pay. Melanie, who answered, had no pretences to being a jurisprudential philosopher. She thought, however, that I might be liable to interest if I refused to pay. When I asked her to explain how one could be liable for interest on a sum that wasn’t owing in the first place, she said she would refer the issue to the legal department, which could give a “definitive written ruling”. I asked to speak to the legal department and was put through to Jane, who admitted it was her job to deal with customer disputes. Yes, she assured me, I was liable for the money because the bank had paid it and Mastercard regulations decreed they could only get it back after I had signed various declarations. When I pointed out that whether or not the bank got the money back didn’t affect my liability for it, she decided that the bank’s solicitor ought to ring me.
Later that morning I was indeed called, by a Mr Cossey. It wasn’t clear if he actually was a lawyer, but his understanding of contract law was the same as mine. He would have a word with Jane and Melanie to make sure they didn’t make the same mistake again. The bank even agreed to give me a little compensation for wasted time. After all, it charges customers who waste the bank’s time – or rather the bank’s computer’s time – by not paying legitimate bills promptly.
But Jane and Melanie weren’t on frolics of their own when they misrepresented the law. They were reflecting what was on the bank’s own forms, and what is said in countless standard letters sent out by credit card companies. But the true legal position is that credit card bills are bills like any other bills. Unless the bank is so sure of its entitlement that it is prepared to sue for a disputed sum, the worst it can do is report an erring customer to a credit reference agency and, if it does so, it may risk an action for libel.
This cavalier approach to customers’ legal rights is not confined to credit cards. When a bank attempts to repossess a mortgaged property, it frequently includes a substantial claim for charges among the money said to be owing. Rarely does it itemise those charges or explain the contractual justification for their being levied. In my experience, the bank, when challenged, will almost invariably abandon such claims. The reason given is that it would be too costly to provide the information. Does that not suggest that the figure was just plucked out of the air in the first place?
The Oxford-based Bank Charge Auditing and Recovery Ltd, a company that specialises in challenging bank charges on the customer’s behalf, says that it has never failed to find errors in the charges, even according to the banks’ own rules. Its greatest success was to recover £88,000 for an Eton travel agency which had been charged a higher interest rate on its overdraft than had been agreed by (surprise, surprise) the Midland.
The whole cheque clearing system, completely unnecessary now that the physical transfer of a cheque is no longer a legal or practical requirement, is just a device to rip off customers. If I give you a cheque for £1,000, the money will be credited to your account two days after it has come out of mine, giving the banks the benefit of it in the meantime. The way they operate, you would think that my bank posted yours £1,000 worth of notes. All that actually happens is that someone pushes a computer key, transferring money from one account to another.
Two days’ interest on £1,000 may not be worth arguing about. But add the millions of other cheques written on the same day, and we are talking about serious money for the banks.
“Not worth arguing about” is a form of reasoning that is very profitable for banks. Few customers do challenge them. Many of my colleagues – presumably as aware of their legal rights as anyone – would feel immense embarrassment at disputing a personal liability, particularly a small one. Only once enough customers complain will the banks move from the present culture, which is based primarily on the assumption that the customer is a mug.
The writer is a barrister. He banks with the Royal Bank of Scotland, and frequently complains to it