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During the Bank Charges Test Case HBOS’s lawyer said customers prefer a payment to be made even if it means a bank charges them a fee. The Office of Fair Trading disagreed, saying it believes customers would prefer the payment not to be made, giving them a chance to make alternative arrangements.
If you had paid for something – whether a £1 bag of carrots – or your monthly mortgage payment – which took you beyond your overdraft limit without realising, would you prefer:
A. You’re fined £35. The payment is made. 8% (532 votes) B. No fine. The payment is unpaid/refused. You need to pay another way. 92% (5899 votes)
PS. There was another similar poll that I restarted after a day (all the 500 votes made were deleted to make it fair) as that was overwhelmingly (98%) in favour of option B, but I decided my drafting of the question had pushed people towards that.
Martin Lewis, Money Saving Expert.
Please note, answers don't constitute financial advice, it is based on generalised journalistic research. Always ensure any decision is made with regards to your own individual circumstance.
The trouble is it's often not an either/or scenario: a bank might refuse the payment AND fine the customer.
Lloyds TSB have recently changed their charges and introduced measures supposed to enable account holders to avoid such fines. One such measure is a "grace period" whereby if you exceed your limit but pay enough money into your account by 3pm the same working day, you won't be fined. What they don't tell you is that they might just decide to refuse a £4 unauthorised overdraft (even if similar transactions have been allowed in the past) and fine you anyway! Though of course it's in the small print that they're allowed to do so with no set rules about when they will or won't, I consider it most unfair that customers are being misled into thinking we're protected by a small safety net when in fact it's being used to catch us out.
The trouble is it's often not an either/or scenario: a bank might refuse the payment AND fine the customer.
Lloyds TSB have recently changed their charges and introduced measures supposed to enable account holders to avoid such fines. One such measure is a "grace period" whereby if you exceed your limit but pay enough money into your account by 3pm the same working day, you won't be fined. What they don't tell you is that they might just decide to refuse a £4 unauthorised overdraft (even if similar transactions have been allowed in the past) and fine you anyway! Though of course it's in the small print that they're allowed to do so with no set rules about when they will or won't, I consider it most unfair that customers are being misled into thinking we're protected by a small safety net when in fact it's being used to catch us out.
True - but this is one of preference - as debated in the Bank Charges Trial. If there were a choice which would you prefer?
Martin Lewis, Money Saving Expert.
Please note, answers don't constitute financial advice, it is based on generalised journalistic research. Always ensure any decision is made with regards to your own individual circumstance.
I would prefer the payment unpaid with no fines if that happened
Its obvious the banks would prefer to charge £40 fine, but to say customers would prefer that is pushing it a bit isn't it?? I know I definitely do not prefer that.
Glad you posted this, makes you wonder exactly what else the bank are assuming about what their customer wants without asking said customer...
Also I have a bone to pick with direct debits - wherever possible I set up standing orders so I can vary the amount I pay due to what is coming in (different pay dates due to Xmas for example).
But I also have quite a few DD coming out each month and with direct debits there is no choice to vary the amount/date of the month (say you want to vary it to a different date for one month and then change it back the next month) and now DD have taken over, lots of companies say they will not take payment via standing order.
DD takes control away from the customer and hands it to the companies and bank. If they made DD more flexible I would be more happy with it as opposed to standing order as its a good principle in theory and works most of the time.
I always wanted to be a procrastinator, never got round to it...
I think the current over-draft system is silly! Our banks have the technology to decline debit card payments instantly, but they allow folks to go into arrears and then charge them interest and penalties.
Yeah, I agree it should be changed.
Also, stop banks from holding my money and earning interest on it when I initiate a transfer into another account. There isn't any reason why that money should not post immediately or at least within 1 working day. Electronic transfers are still taking 3 business days to post and that's not good enough.
It's called 'float time' and banks and large corporations have been doing it for years and making a lot of money using your money while you waited.
Adam Smith was a proponent of regulated banking and so am I!
Slugging people with fines for overdrawing their account is punishing the people who can least afford it. It definitely shouldn't be allowed.
The slow bank transfers thing is equally confusing. I'm from Australia and transfers their are overnight or instant if you are transferring to another account in the same bank.
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IF banks went down the road of declining ALL transactions due to insufficient funds - even when the customer is short by just a few pennies...
Just wondered how people would feel if the direct debit for their mortgage or credit card failed...thus incurring penalties from said departments???
Granted, the late payment charge for defaulting on a credit card is only £12 (compared to £25 -£35 for a failed direct debit), however, their are further implications such as ones credit rating being adversley affected.
Comments please...
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P.S. can you honestly say you would not be the slightest bit embarassed if you had a transacion declined due to insufficient funds...im sure when it came down to it, many of you would rather risk the wrath of your bank than get to the front of the checkout with a trolley full of shopping...only to be told "transaction failed, insufficient funds"
How would you feel if this happened if you were with friends / colleagues / peers at the time?
DD takes control away from the customer and hands it to the companies and bank. If they made DD more flexible I would be more happy with it as opposed to standing order as its a good principle in theory and works most of the time.
Apologies for going off topic, however, just have to point out that a direct debit has nothing to do with banks (unless its to pay for a banking product) this is a seperate agreement between the customer and the company.
If you have a product or service (ie mobile phone) it SHOULD be down to the company to ensure the bill gets paid and not for the customer to decide to pay a little this week and a little next week...the company are entitled to some assurances otherwise you would just be on another thread on this website having a moan when your phone company disconnects you for non-payment!
Shouldn't the second option of "No fine. The payment is unpaid/refused." really included something in brackets saying risk further charges from those you have failed to pay? As some places charge you for failure of payment on time.
This is all very easy while we keep it in the realm of the latest fashion victim purchase and even to an extent the mortgage direct debit (since you won't get evicted instantly). In fact most things on direct debit wouldn't be a problem because it takes time to get back to the relevant company in which time you may be able to arrange an alternative.
The question really bites when you are trying to pay for something you really need at some ungodly hour. I used the example on the original thread of petrol on a Sunday night at a motorway service station. A flat refusal at such an hour means you are stuck until the banking system reopens - you might phone the bank on their 24/7 phone line, and they might agree an extension but as far as I'm aware the new limit won't be active on swipe machines until the banking system re-opens next working day. I had a situation where I had to instantly upgrade my RAC membership because my car was spewing petrol from a leaking tank onto my drive adjacent to my house - not sure I'd have wanted to hang around (bearing in mind even after the upgrade I had to wait for the patrol to get there) waiting for a new limit - at that point £35 would have been cheap.
I'm all in favour of anything being cheaper so if the £35 can be reduced to £5 then fair enough, but I think the same people currently getting caught by the charges will be the ones sleeping rough in service stations, or not being able to get their heating fixed over the bank holiday etc. Be very careful when you ask for rigid limits - at present with good planning you can avoid charges - if it becomes a system of blanket refusal people will still have to exercise good planning to avoid problems.
On the grounds that I can choose to avoid a £35 charge but could not choose to override a blanket refusal in an emergency I therefore reluctantly have to vote a)
In France, I believe it's a criminal offence to write a cheque without having the cleared funds in your account.
It is in this country too. I person I worked with spent 6 months inside for doing this (although it was for 30K)
I think if it came to it most people would prefer the charge than having their credit record trashed when various DDs were returned unpaid.
Whilst I agree with charges in principle what I disagree with is the way the bank mount charges upon charges etc so that going £3 over you OD limit means you end up paying £100.
I would prefer to have the payment returned unpaid. Problem is the organisation I was paying would probably charge me a returned dd fee. I dont think that this should be the banks choice though - they are authorising transactions for which I have no funds. Would that not require a credit agreement or does this come with all bank accounts hidden in the t&cs?
I have only ever gone over my limit once, and that was for a standing order they paid 3 days early. If it had gone on the day I set it up for, I would have been fine. When I phoned them, they said I must have gone online and changed it! Why would I do that? I would rather they didn't pay, and saved me the £50 I got whacked with - £25 for going over plus a monthly over limit fee of £25. When I applied for it back, they put it on hold, even though I said its nothing to do with the court case! They won't budge though.
Provided the bank tells you what will happen before you sign up, I don't see it matters either way as you choose to accept or go someplace else. An unauthorised overdraft is theft in my book and you are lucky to get away with a penalty - and it is not a 'fine'.
Have to agree that bank transfers, BGC, cheques etc need speeding up.
I bet there's only a handfull of people on this forum can tell you the exact amount they've got in their bank account.
Gone are the days when the only way you could get at your money was with a pass book or a cheque when you instantly knew how much you had in your account.
Now, there are so many ways to get at your money, that unless you keep checking your balance it's very easy to go overdrawn.
The supplier of product or service provides their goods service in good faith expecting that the bank will honour the promised payment however if payments have the option to be refused there may be a return to the process of waiting until the cheque or payment is cleared. It may be appropriate that at point of sale a transaction payment can be queried if customer is present however in the instance of automatic payment being requested by supplier and cancelled by bank I think that there will be many instances of "bad debt" incorrectlyrecorded by various suppliers and debt companies which is a whole lot more difficult to resolve and correct than a squabble with bank over a few transactions. It would raise a lot of questions on contract law, between customer and supplier and the banks role in the contract. It is my opinion that the bank should publish and apply fair one off charges rather than distort the contract between supplier customer. Also the hidden cost of the supplier of the product having to chase up failed / rejected direct debits will be considerable and be paid by the consumer through future price increases.
Freebie Manor was the name on the Plaque my mum gave me for first home which was equiped with freebie banded cups, teapot, coffee pot oh and a sofa which cost a bottle of Vodka. Since than my husband has even felt sorry for car salesmen. Balance transfer 0% to Mortgage has saved us over 3K in interest been doing it since 2004.
Pls be nice to all MoneySavers. There's no such thing as a stupid question, and even if you disagree courtesy helps. Take care over copyright. Use excerpts and links rather than copying long text. This site asserts copyright on all comments posted on the board.
Pls be nice to all MoneySavers. There's no such thing as a stupid question, and even if you disagree courtesy helps.
Bank Charges: Fine v Payout Poll
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