Iowa Banking Law Blog

Uk Rules that Overdraft Fees Can be Judged for Fairness

Overdraft fees have been a point of contention for consumer groups in the U.S. for some time now.  There have been claims that overdraft fees are not adequately disclosed at the time accounts are opened, and claims that debit transaction should be rejected at the point of purchase instead of charging an overdraft.  The UK has similar issues.  In a recent case, a UK judge decided that the Office of Fair Trading can rule on the fairness of overdraft charges and hold UK bank liable for unfair charges.  The OFT claims that many banks charge overdraft fees of up to 39 pounds when the cost to the bank for the overdraft is 2 pounds or less.  This could put UK banks on the hook for hundreds of millions of dollars in overdraft charges.  It could also open the door to high consequential damages claims -- [you charged me an improper overdraft which caused me to miss my rent payment which caused me to have to incur credit card debt to cover bills which caused me to incur thousands in interest.  Because of the $15 overcharge, you caused me $10,000 in damages].  UK banks generate 3.5 billion pounds from overdraft charges a year. 

Banking law in the UK is very different from banking law in the US so there is no cause for panic.  It is nonetheless an interesting issue and decision that could have some impact in the U.S.  See BBC article for more.   

Is LIBOR Accurate?

The Banking Law Prof Blog has a brief discussion and link to a Wall Street Journal article suggesting that LIBOR (the London inter-bank offered rate) may be artificially low.  Banks in trouble may have been reporting lower rates for inter bank borrowing because they don't want to own up to their actual financial condition.  See Banking Law Prof Blog Article.  So, consumers had been puffing their credit to get home loans, if they are even asked.  Unregulated mortgage brokers puffed, or neglected to fully explain, the financial terms of mortgages they were handing out left and right.  These loans were then securitized and sent down the line.  Now, after those loans went south, partially causing our current economic "slow down," institutions are puffing the interest rate they are getting?  Is the state of the economy being puffed to us?  Let's hope all the huffing and puffing doesn't blow this house down.   

Fed Approves Energy Managment and Tolling

The Royal Bank of Scotland submitted an application with the Board of Governors to engage in physical commodity trading, energy management services, and energy tolling.  The Board stated that it had previously found physical commodity trading and energy management services to be complementary to the financial activity of engaging in commodity derivatives transactions and investment advisory services.  The Board had not considered energy tolling before.  it found that energy tolling is an outgrowth of the financial activity of commodity derivatives transactions and allows the Financial Holding Company to hedge its energy positions and those of its clients.  The vague "complementary to a financial activity" standard has seemingly been interpreted broadly; it will be interesting to see where the lines will be drawn.      

Subpoena Scam

If you get an email purporting to be a Subpoena in a Civil Case in California Federal Court do not open the attachment and do not click on any links in the email.  There is a virus going around that is masked as a subpoena.  We were forwarded such an email from an Iowa financial institution client today and want to make sure no banks fall victim.  Out of state subpoenas are generally not enforceable unless they go through an Iowa court first and they would probably not be sent via email.  Nonetheless, we have encountered out of state subpoenas that appear to be bogus and were merely faxed to a client, but turned out to be linked to a real case.  If you have any questions as to whether a subpoena or email is for real, contact your legal counsel.  Let them open it. 

The case number on the bogus subpoena we encountered was 28-913-FRG.  The purported issuing officer and address was:  O'Mevely & Meyers LLP; 400 South Hope Street, Los Angeles, CA 90071. 

Hiatus Over -- Legal Advice

The Iowa Banking Law Blog has admittedly been sleeping on the job lately.  The blogging job, not the practice of law job.  Anyway, the hiatus is over, you can expect more regular posts from now on.  We return with some legal advice.  You can ignore the disclaimer on this one--and only on this one.  Ready.  Here it is.  Do not act like this CEO of a subprime mortgage company in a deposition.  Warning, the excerpts from the deposition transcript does contain some foul language.  The CEO and his attorney were fined $29,000 for the behavior, which included dropping the F-word 73 times.  I found this article on the Bank Lawyer's Blog.

That will be the last instance of legal advice you can rely on here.  Back to substantive banking law news from here on out.