Describe the Corporate Legal Systems, Discussing Its Advantages and Disadvantages and Its Relevance to the Bank's Dispute over the Fairness of Account Charges

In September 2006, the Office of Fair Trading (OFT) announced its plans to investigate default charges associated with bank current accounts, following the successful investigation into credit card default charges.   The OFT noted that the broad principles in relation to default charges were likely to apply across the whole retail banking sector.   This investigation also followed an increase in the number of people reclaiming their unauthorised overdraft charges and high levels of media coverage on the subject.   The OFT stated that it shared public concern over the amount and frequency of bank current account charges, following their initial investigation.   Banks were in doubt as to whether or not bank charges were under the OFT’s remit, which triggered the legal dispute.   It was at this point that banks agreed to a test case and the hearing started.

There are two main issues being argued in this case – firstly, whether or not bank charges are subject to the fairness rule of the Unfair Terms of Consumer Contracts (UTCC) Regulations (part of the Unfair Contract Terms Act 1977) and therefore unfair and secondly, whether bank charges are in fact penalties disguised as service charges.

According to UTCC Regulations, an unfair term is one that is ‘contrary to the requirement of good faith’ and ‘causes a significant imbalance in the parties rights…to the detriment of the consumer’ (   ‘Good faith’ is defined as dealing fairly and openly with consumers and requires that terms are expressed clearly.   In Director General of Fair Trading v First National Bank plc [2001] AC 481, it was also noted that the supplier must not take advantage of the consumers lack of knowledge on the subject, or their necessity for the product.   However, it only applies to contracts made after 1995.

Common law is ‘judge made’ law.   The UTCCR is made by the legislative or statute law, which is the term for Acts of...