The recent judgment of the
Upon considering the Dissilio case our main observations are:
-
The judgment was given on specific facts and does not set out general principles of law which will be applicable to all banking relationships with customers.
- The effect of the judgment is not then to stop banks from charging customers breakage costs incurred in instances where a customer has contractually undertaken to pay those costs or early termination penalties when these have been agreed with the client.
- In order to achieve treating customers fairly ("TCF") outcomes, banks must ensure that all applicable staff members are well-trained in the banking products in respect of which financial services are rendered. Customer-facing staff must be able to adequately explain the features of products to customers, especially if a customer will incur liability in accordance with the terms of those products.
- It is not sufficient to refer to policies in a general sense as the reason for a liability being incurred, rather customers should understand the contractual terms of the arrangements that they conclude.
- Failure by staff members to ensure that a customer understands the liabilities that they could incur when entering into or purchasing a financial product offered by a bank creates conduct risk for the bank (and indeed, once the Conduct of Financial Institutions Bill has been enacted, for any financial institution).
- TCF outcomes are equally applicable at the time that a customer varies a financial product.
- Legal agreements should be drafted in simple language to reduce the risk of an unforeseen interpretation of a clause. In this case, an addendum to an existing agreement was found by the court to replace the existing agreement, despite the fact that the addendum contained a clause recording that the existing agreement should continue to have full force and effect.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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