Account Issues

Terms of Agreement

Modern consumer protection legislation effectively requires the terms of the bank customer relationship to be set out in writing. It is particularly so in the case of loans and facilities where specific consumer protection provisions apply.

The written terms are presumed to be the complete agreement. See generally the sections on contract law.

A verbal side agreement, side letter or collateral contract requires very cogent evidence. There are a limited number of bases only on which the courts are willing to allow oral evidence to contradict a written contract.

Consumers

The Consumer Protection Code prohibits clauses which exclude liability of a provider for the duties and duties under the Code. Providers may not exclude or restrict any legal liability or duty of care owed to a consumer under the Code or any other duty to act with due skill care and diligence to the consumer or any liability owed in consequence of failure to exercise of skill and diligence.

It appears that for the purpose of the Consumer Credit Act, a  consumer is  a person who  borrows for individual needs in terms of private consumption. Cases appear to hold that a one-off transaction does not thereby make the borrower a consumer. Other cases take a more expansive view of what is a consumer.

It appears however that they are inconsistent with the approach of European courts. Most of the cases discussing the issue  did not look at the matter on the merits but  whether there was a sufficient issue of law to allow the matter to go to a full hearing  in an application for  summary judgement.

It appears that confirmation by the parties in the loan documents that they are or not consumers will not necessarily override the true position. Some court have taken the view that the self-confirmations are effective. However other courts have taken the view that the question of whether or not the parties are or are not consumers in the particular circumstances may be determined otherwise by the court

Proof of Account

The Bankers Book Evidence legislation dates from the late 19th century. One part of it was designed to make certain entries in bank records admissible as evidence of balances due in court proceedings. Such entries might otherwise constitute inadmissible hearsay.

The legislation provides that a copy of an entry in a banker’s book may be received as presumptive evidence of the entry, matters, transactions and accounts recorded in it. It must be proved that the entry forms part of the ordinary books of the bank and was made in the usual course of the business of the bank.

In the case of electronic records reproduction of the electronic record is equivalent. Proof is to be given by the person responsible for reproduction and copying of the information as appropriate. Other methods of proof of debt and transactions on account in accordance with the rules of evidence may be equally admissible.

There have been several cases financial crisis in which applications for judgement have been challenged on various grounds. One such ground is the proof of the amount due and the hearsay evidence rule. The courts have allowed evidence by bank officials of the sums due based on their examination of bank records. Other cases have distinguished the position where the evidence is given other than by an officer of the banks for example a service provider.

Other courts have taken the view of taken a stricter view of the hearsay evidence rule. The Supreme Court has taken the less expansive view of the hearsay rule in the context of proof of debt. They have allowed for evidence on the basis of common law exception to the hearsay evidence rule rather than the bankers book evidence legislation.

The courts have however emphasised that a borrower is entitled to a clear and unambiguous statement breaking down and showing how the sum claimed is owed.

Inspection of Bank Books

The Bankers Books Evidence act allows an application by a party to legal proceedings to court to allow inspection of banker’s book entries in connection with the proceedings. The bank may or may not be party to the application. The  order is served on the bank.

The courts bring modern privacy considerations to bear.  The legislation extends to third parties. However, the courts are very reluctant to allow inspection of a third party’s bank account unless the matter was essential and would be otherwise admissible as evidence.

The legislation has been amended by criminal legislation allowing for application by a member of the Garda Siochana to court to see copies of banker’s records where there are reasonable grounds for believing that an indictable offence has been committed and the bank is in possession of material which is likely to be of substantial value in investigating the offence.

In practice the Banks Books Evidence Act provision last mentioned has been superseded by modern third-party discovery. Generally, documents relevant to matters in dispute in litigation under the control of one party to litigation a be discovered and inspected.

Rights to Banking

The European Union Payments Account Directive facilitate switching current accounts between banks. The Irish Central Bank has had codes of practice for some time designed to facilitate switching of accounts.

The EU-based legislation standardises certain terms for banking services with a view to facilitating interoperability. The European Banking Authority has published regulatory technical standards and implementing technical standards to facilitate account portability. It provides for number of defined terms of service. It requires customers to be provided with documents in relation to fees for services with a view to facilitating competition.

Legislation also requires banks to facilitate persons who cannot easily obtain banking accounts and facilities, such as those with no fixed abode and asylum seekers. Basic banking and payment services must be provided. 2016 regulations. 2014 directive

Default Interest

Penalty interest is effectively prohibited in the case of a loan under the Consumer Credit Act. Penalty interest may be  unfair under the unfair contract terms regulations applicable to consumers, provided it is deemed to be a core financial term.

In accordance with ordinary contract principles,  an additional sum payable on breach is permissible where it is a genuine pre-estimate of loss. Where it is not a genuine or reasonable pre-estimate of loss, it as potentially voids as a penalty. This follows from the basic principle of contracts allow for compensation but not penalty.

It is recognised that breach of bank facility will cause loss to the bank and may entail regulatory requirements by which they must set aside funds.  . Some elements of additional interest may be permitted. Sums beyond this, in  particular those labelled penalties and surcharges are likely to be e void.

The matter of whether a clause constitutes a penalty is judged at the time the contract was made. Courts are more willing to interfere with the terms of the contract where the parties are not of equal bargaining power. However, the onus remains on the person claiming that there is a penalty and that the obligation to pay the additional sum is thereby affected are rendered void.

Appropriation

Appropriation is the right of a lender to apply a particular sum for the particular debt. This may be very relevant where sums are guaranteed or where there is a shortfall upon realisation of the security.

The general presumption is that a lender is free to appropriate a sum in the absence of a specific direction otherwise. Loan facilities may specifically and unconditionally confer a right of appropriation and the lender. Statutory provisions may provide otherwise.

Certificate

A provision that a certificate by the bank is to be conclusive in relation to the certain matters, in  particular the calculation of interest is generally upheld as valid. It may be challenged where there is a patent error or fraud.

Freezing the Account

Mareva injunctions may be ordered in legal proceedings to prevent a party reducing or disposing or  of assets within the jurisdiction pending litigation, . The order will usually be made in respect of bank accounts. They may thereby freeze the account to the extent provided.

A European Union Account Preservation order has been provided for by EU  regulation. This is an  alternative to a Mareva injunction. It may be applied for there is a commercial or other civil dispute between a party in one  EU member state and  funds are held in a financial institution in another EU state.

It may be made in respect of account in the name of the respondent, or an account held on his or her behalf as trustee. The order may be granted if there is an urgent need because a real risk exists that enforcement will be impeded or made substantially more difficult if the order is not granted.

The  applicant’s case must be likely to succeed. The court must be satisfied that there is a real risk that by the time the creditor is able to have the existing or future judgement enforced, that the debtor may have dissipated concealed or destroyed his assets or  disposed of them at undervalue.