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Newsflash 4 January 2007:
NatWest change terms and conditions in sign of desperation

NatWest has issued new terms and conditions for the operation of its current accounts. These will take effect from 1 February 2007. The crux of the change is that they are trying to reword their terms so that when a customer exceeds their overdraft limit this will not be deemed to be a breach of contract. This means that they will then try to argue that the common law rules regarding penalties in contracts and the Unfair Terms in Consumer Contracts Regulations 1999 do not apply to these charges and, therefore, they can charge what they like!

Nice try, NatWest. Let's see you try it with a judge in a court of law.

For the anoraks amongst my readers, here are the changes that NatWest propose:

Old wording:

Operations on the account

• You must always ensure that the cleared balance (plus, where applicable, any unused agreed overdraft facility) on your account at 3.30 p.m. on the working weekday before the day:
- cheques you have issued are presented for payment
- standing orders and direct debits are due to be paid
- you withdraw money from a cash machine
- you carry out a Maestro or Solo transaction
- you request us to make payment by any electronic means or by telephone
- any other transactions are due to take place, including the application of interest and charges,
is sufficient to cover payment of all these transactions.

• If a sufficient cleared balance (plus, where applicable, any unused agreed overdraft facility) to cover payment is not available on your account by 3.30 pm on the working weekday before the day on which these transactions are due to take place, payment of some or all of the transactions may be refused.

• However, if at any time such transactions would result, without prior arrangement, in the account being overdrawn or the agreed overdraft limit being exceeded, we may exercise our sole discretion and without contacting you, allow an overdraft to be created or allow the borrowing limit to be exceeded. In these circumstances, the new or excess overdraft is an unarranged overdraft.

New wording

Operations on the account

If at any time we receive instructions to withdraw funds from the account where:
• there are insufficient funds available to cover the withdrawal, or
• the requested withdrawal would cause an agreed overdraft limit to be exceeded
We may exercise our sole discretion and, without contacting you, either (1) refuse to pay some or all of the items and/or (2) allow an overdraft to be created or allow the borrowing limit to be exceeded (in which case, the new or excess overdraft is an unarranged overdraft).

For the purposes of assessing whether you have sufficient funds available to cover the withdrawal or whether the withdrawal would cause an agreed overdraft limit to be exceeded we will look at the cleared balance (plus, where applicable, any unused agreed overdraft facility) on your account at 3.30 pm on the working weekday before we receive instructions to withdraw funds.

Examples or our receiving instructions to withdraw funds include cases where:
• cheques you have issued are presented for payment
• standing orders and direct debits fall due to be paid
• you withdraw money from a cash machine
• you carry out a Maestro or Solo transaction
• you request us to make payments by any electronic means or by telephone
• any other transaction on your account falls due for payment

Fees, interest and other charges

The word "default" is removed where it appears in your existing terms and conditions on the first line under this heading.
 

So, what does that all mean?

Well, under the old terms, if a cheque was presented for payment and there were not sufficient funds in the account at close of business on the previous day, the customer had clearly breached their contractual obligation to have sufficient funds available. But under the new wording, NatWest are pretending that the customer has not breached any contract term by not having sufficient money in the account. By issuing a cheque when there are not sufficient funds in the account, the customer is making an offer to NatWest to extend their overdraft and NatWest are at liberty to accept or reject the offer and, in either case, will charge a fee for doing so.

What will the OFT make of NatWest's action?

In the OFT report into credit card charges in April 2006, it said at paragraph 4.21:

Disguised penalties

The analysis in this statement is in terms of explicit, transparent default fees. Attempts to restructure accounts in order to present events of default spuriously as additional services for which a charge may be made should be viewed as disguised penalties and equally open to challenge where grounds of unfairness exist. (For example, a charge for "agreeing to" or "allowing" a customer to exceed his credit limit is no different from a charge for the customer's "default" in exceeding his credit limit.) The UTCCRs are concerned with the intention and effects of terms, not just their mechanism.

So, let us hope that the OFT has the guts to stick to its words on this issue and tell NatWest what to do with their new terms.

Advice for anyone suing NatWest

In the short term, do nothing different if you are suing NatWest. However, if it looks at any time that NatWest might actually be planning to go to court to defend a case, you can use this move by them back against them. Any charges that have been made to your account before 31 January 2007 will still be subject to the old conditions. Bearing in mind that you can claim back for up to 6 years, this means that NatWest could still be facing claims based on the old conditions up to early 2013! If it should ever go to court, you could use NatWest's change of conditions as a tacit admission that they did not think that their old conditions were watertight. Otherwise, why did they change them?

Anyone who needs specific advice on their case, please email me at bankbuster@mac.com.

For other news stories, see News stories
 

Published and promoted by Bob Egerton, TR2 4RS