IVA & Debt Consolidation Advice

An accountant from the North-West of England has won a claim against Lloyds TSB for “illegal” bank account charges after amounting £2000 in penalties for bounced cheques, and exceeding his overdraft limit.

Reported in the Guardian newspaper, Brian Mullen lodged a claim against Lloyds TSB arguing that the penalties were illegal under contract law, and has apparently been successful.

Actually, Lloyds TSB avoided contesting the County Court claim by failing to appear. When Lloyd’s failed to pay, Mr Mullen found himself in the bizarre situation where he had to call in bailiffs to recover his debt. In fact Mr Mullen was awarded a warrant of execution, whereby bailiffs were authorised to seize Lloyds TSB assets to recover the unpaid debt. Lloyds eventually paid Mr Mullen, but in a statement reserved their right to contest the judgement, but said that they were not going to do so, even though they felt that their charges were indeed lawful.

In effect, Lloyds TSB at this time, have side-stepped the issue of the legality of their penalty charges at this time. The banks and credit card lenders might argue that penalty charges are an important deterrent to reckless borrowers. However, many argue that the level of their charges, amounting to some £2 billion each year, far exceeds the amount required to cover their costs, and may well be illegal under UK law.

It seems that in the case of Mr Mullen, Lloyds have managed to duck the issue on this occasion, but this is one problem that’s not going away.