Answering bank charges skeptics: pls help....

natweststaffmember

MSE_Martin wrote: »

IM PLANNING A GUIDE TO ANSWER COMMON SCEPTICAL QUESTIONS ABOUT BANK CHARGES. MY VERY ROUGH UNPROOFED INITIAL THOUGHTS ARE BELOW.

WHETHER YOUR PRO OR ANTI-BANK CHARGES YOUR THOUGHTS ON WHAT Q or As ARE MISSING WOULD BE REALLY HELP (AND AGAIN ITS VERY ROUGH SO PLEASE FORGIVE ANY GLARING ERRORS OR STRANGE PHRASES).

THIS ISNT ABOUT DEBATING THE ANSWERS (THATLL COME LATER) MORE ABOUT IF IVE MISSED ANY QUESTIONS>

THANKS...

MARTIN

The final stages in the history of the great bank charges reclaiming campaign are about to be written.

Yet many misconceptions about its impact still fly around, “will it mean the end of free banking?”, “haven’t people just stolen money from the banks?”
Having debated and argued many of these since I first got involved in the campaign back in January 2006, its time to collate them, here’s my commonly asked Bank Charges Q&A

Q. “Where are we in the bank charges process?”

A. The high court and court have appeal have said fairness laws do apply to bank charges, the banks are currently appealing that in the House of Lords. A result is expected in mid-October.Assuming the Lords upholds that decision, the next stage is for the Office of Fair Trading to decide whether it thinks the charges(I would add the words "terms" and lose the actually) actually are unfair. It has provisionally said it does.
Furthermore, I would add that the OFT will initially ask for voluntary compliance which is unlikely.
Yet the bank could then launch a legal challenge to the OFT’s decision, which could see the whole court process restarted. Sadly, it wouldn’t be too good an idea to bet against this as the banks have already shown a strong tendancy to try and drag this out.

Q. “Wouldn’t a bank charges payout be a nightmare for the economy, after all many big banks are now publically owned?”

A. Actually it’s arguable there’s nothing the economy needs more than the stimulus of a bank charges payout.

Currently the Bank of England is trying to push money out into the economy through something called “quantative easing” – in other words printing money – and each time it does it we’re talking £50bn plus – far bigger than the amount that’d need paying out on bank charges (possibly around £10bn even if we had automatic payback).

The main place that cash goes is to the banks, and the hope is they’ll lend it out so the economy flows. Yet they’re keeping hold of it, to buff up their balance sheets and ensure they meet the imposed capital restrictions.

So what better way to get the money out there, and immediately stimulate the economy than putting this money back into real people’s hands.

Q. “Will everyone get all their money back?”

A. Assuming the Banks legal challenges are all turned down, it should open to the doors to people getting their money back. Yet exactly how is still unclear – as the legal cases themselves are about the fairness of charges, not about reclaiming itself.
Part of the secondary litigation will have to deal with the consequences of unfairness under UTCCR 1999. The term rendered unfair and unenforceable would be repayable for example, unpaid fees. However it is for the National Court ie uk to decide how far back you can go with two schools of thought, (1) Going back to the start of UTCCR 1999 which has its origins in UTCCR 1995(I believe) which leads to some people claiming it will be back to 1995. Or (2) That it will go back to the original FSA Waiver of July 2001. A UK court would have to decide this specific issue.
The worst case scenario is people will need to take individual small claims cases again against the banks, as happened in the early days. Though it is hoped at the very least a more straightforward system of claiming would be set up, perhaps through the financial Ombudsman.
I think that FOS or bank directly is the more likely since the last thing the judiciary would want is a logjam and the issues would by then be decided through litigation already so Small Claims court should only be used as a last resort.
That’s the reason this site has been lobbying politicians to make sure there’s a fair and appropriate system of payout once the entire thing is sorted out – include lobbying for an automatic payback of every charge (see replies from {David Cameron} and {Nick Clegg}).

Q. “Is it still worth claiming?”

A. The hold imposed by the regulator, the FSA, on banks needing to deal with reclaiming cases, still stands. There are currently over a million people said to be in the queue to reclaim charges – and they will all need processing once everything works through and the hold is lifted.

Therefore the sooner people get their claim in (free templates in the {bank charges} guide) the better. Most important to note is that the hold on reclaiming for anyone suffering financial hardship does not apply and you can reclaim right ow (see the {bank charges financial hardship} guide.

Q. “Why should people who’ve abused their bank accounts get this money back leaving those who’ve behaved rightly to pay for it?”

A. While of course I understand the argument, for me it’s the banks who’ve abused accounts through a systemic, unlawful abuse of customers who go beyond their limits.
For years its been the people having bank charges have been subsidizing the banks. It’s estimated banks have made over £3 billion a year from bank charges, a pure profit based system.
I think you are being a bit generous there to the banks, Martin, I would say it was more like £4 billion which I think has been quoted for the year 2006 by Vos, Natioonwide QC in the OFT test case which originally came from the OFT study.
Regardless of the fact that financial justice alone means we shouldn’t allow banks to get away with their system unlawful behavior – actually its very unlikely the loss of profit from the banks will filter to those who manage their accounts well.

We have a hugely competitive bank account market place. Many banks will regularly pay £100 sign up bonuses, give 0% overdrafts, 6% interest in credit to try and sign up lucrative new customers (see {best bank accounts} guide). This isn’t likely to end.

The current account is the building block of finance; it’s more than a mere product, as the data gathered is used to cross-sell us many other products. Any bank who introduces a fee will haemorrhage customers, and others will lap up the commercial opportunities and suck in their customers with fees-free accounts.

Q. Hasn’t bank charge reclaiming hit the national fibre, leading to a compensation culture?

A. Actually my view is the opposite. No single issue has better educated consumers, a bank’s job is to make money, simple as that. It’s there to flog you things. Yet for years too many people have believed their bank’s their friend.

The bank charges campaign has opened the door to a new well-placed scepticism; it means that people finally realise the bank isn’t on their side and isn’t always right; it can be beaten, and we should be cheering such a great move forward. Without it PPI misselling and Mortgage Exit Fee reclaiming wouldn’t have been so vast.
There’s a big difference between reclaiming and compensation. Reclaiming is about getting back money that was wrongfully taken from you – not about trying to assign blame when something happens to you – for me reclaiming is pure financial justice.

Q. “Will this mean the end of free banking?”

A. This question has been running on ever since reclaiming first started (see my blogs from 2007 & 2008 on it “don’t blame reclaimers” and “it’s not the end of free banking”.)


Yet I’ve never taken this stance. Here’s the reasons why I still don’t think bank charges reclaiming will kill ‘free banking’.

• Free banking doesn’t exist so how can it end?

We do not have free banking in the UK, we have ‘fees-free banking if you’re in credit(lose the "s" at the end of fees)’. Ask anyone who is overdrawn if their account is free. Even if you’re in credit there are a myriad of other charges that banks levy, and with most giving a paltry 0.1% in-credit interest but charging 14%-18% for you to borrow it back, ‘free’ is a true misnomer.

• It’s mismanagement, not bank charges that’ve really hurt.
  
  Even if £3bn is paid out, repaying every bank charge for years, this is a fraction of the taxpayer’s bill for bailing out banks. If anything sees off ‘free banking’, it’ll be SHAMBOLIC management decisions that cost hundreds of billions of pounds (much to the taxpayer) and caused record losses. In context, bank charges reclaiming is small change.
• The market is too competitive.
  
  As explained above, for those who’ve managed their accounts within their limits (always the best way) the market place is generally still amazingly competitive.

• Banks always add charges.
  
  Banks are always adding stealth charges to everything; both before, since and I’m sure, after bank charges.
  
  Whether it’s additional loads for foreign exchange spending, paying to change your address, or even if they launch charges for going to the loo in branches – their job is to make money from us. Bank charges reclaiming may be a big cost, but they’d try just as hard to add whatever charges they can on, with or without it.
• If account fees were coming they would’ve already happened.

A bank’s job is to make money, and they’re very good at it. Win or lose, be assured many dedicated bank brains will be working on new ways to generate profits from consumers. That’s what they do, and very successfully.
It always makes me laugh that articles often refer back to the April 06 OFT opinion that effectively reduced credit card charges and say “lots of new credit card charges have been introduced because of the OFT case”.
Many credit card charges were launched because the bank found another way to bamboozle customers into giving it more money. Do you really think once they thought of this, they wouldn’t have introduced te charges anyway?

Bank charges reclaiming has been around three years now. Over £1 billion is thought to have been paid out, and the banks have at the same time (though not caused by it) collapsed, yet STILL we haven’t seen the end of ‘free banking’.

Jon Snow, as part of a Channel 4 news interview on bank charges, way in 2007/8 said he bet banks would start introducing charges for cash machine withdrawals – we still haven’t seen it.

Q. “People knew about these charges, its their own fault?”

A. These charges are unlawful, and hopefully the courts will soon back that up. The fact people knew about them doesn’t change their illegality.

If I walked up to someone in the street, told them I was going to punch them, then punched them – the fact I’d prewarned doesn’t make my actions any more legal.

Banks have been unlawfully taking money, and they’ve been doing it without asking. Remember if British Gas thinks you owe it money it needs take you to court to do so. If a bank wants your money, it just takes it – one reason they’ve avoided court decisions for so long – they’ve been able to create their own ‘justice’.
Worse while there is competition in the bank account market as a whole, there’s never been competition in the bank charges sector - if you don’t like the charges there’s no way to avoid it – all banks levy the same charges.

Over the last few years more and more companies have pushed, discounted and cajoled us into paying by Direct Debit. If you don’t you pay more; or in some cases can’t even get a deal. When you factor that it in to the ‘manage your money argument’. It gets very difficult; with automated payouts if you dont have the money, it disappears anyway. Direct Debit bouncing is a big trigger for many bank charges.

Q. “These people deserve what they get, they’re stealing the banks money?”

A. This one’s a complete myth, banks invented bank charges to make money, they’re not being ‘stolen from’.
In days of yore, if you attempted to pay a Direct Debit or cheque with insufficient money in your account it simply wasn’t paid out. Then, probably because some bright banking spark decided that more money could be made if they did pay out, things were changed.

Now, the real system is hidden, but it works like this:

· Authorised overdraft e.g. up to £500
· Unauthorised paid limit e.g. up to £1,000 your money will still be paid but you'll be given a bank charge
· Unauthorised unpaid limit e.g. beyond £1,000 here no payment will be made.

You have to admire the profiteering genius of this system. Instead of not paying, the banks created a system where they would pay out, but would charge £35 a pop for every transaction – no matter how small – beyond that limit. It’s no wonder they now make from £1.6bn to £3bn a year from this.

In the past once you couldn’t pay out you’d know as the payment wouldn’t go through. Yet this new system meant many many more penalty charges could be levied as people paid for things on cards in stores, and all went through fine without realising there’d be a £35 charge every time.
If banks didn’t want people to take the cash, they simply wouldn’t pay it out.

Q. Actual question sent to my NOTW column... “Why don’t you advise these scrotes to keep a more watchful eye on their own finances so they don't go overdrawn in the first place. It ain't rocket science: if you can't afford it, don't spend it?“

A. In one way the questions right, as I always explain, the best way to beat charges is avoidance. Keep track of what’s in your account, do a budget, and manage your money carefully.

Yet in the main the questions a disgusting slur on the millions who’ve had charges. I got involved in the campaign to reclaim bank charges after meeting a single mum, a carer for her autistic son. She NEVER overspent, but a benefits office glitch meant it paid out late, so five direct debits bounced, meaning nearly £200 of charges.

Of course she couldn’t pay. I met her a year later when charges on the charges meant she owed £3,000. A good swathe of the UK are victims of this malicious financial injustice: charges are designed to penalise and entrap.

see above, and I do see where you are coming from on this but not sure you need to do so. It would spoil my sport of swatting them

natweststaffmember

Martin I would add that RBS Group reportedly used the Government insurance scheme for £250 Billion of debt. The kind of amounts that might be repayable will not hit this amount so the government could charge the bank and therefore make money from the banks should this happen again.
I think you have covered most of the general skeptics things:

1) Read the terms and conditions
2) You should budget better
3) How about not spending money you don't have
4) if you didn't have sky TV then maybe you could pay your charges
5) I never go overdrawn so how come you can't
6) Why should I pay for my banking?

I think you might want to make reference to New Zealand who have a model of bank account charging and are owned by NAB who own Yorkshire/Clydesdale and have scrapped charges because of it being the biggest issue of complaints over there.
Furthermore, I think the interplay of charges needs to be mentioned because whilst some banks will allow one mistake most don't allow two and that second one can be very very costly eating into someone's budget.
Apart from that. it seems ok.

bluey890

Anecdotal here ...

I once asked a well known building society to stop withdrawals from my current account should the balance become negative. This was to prevent potential id fraudsters being able to take money from the account (I think the BS allowed about 6k of debt on the account).

Customer Services said sure no problem. However, to my amusement they lowered the overdraft facility to zero. Upon being asked whether the account could still go negative, the reply was, sure ... the (only) difference was that I'd now be charged far more for the priveledge. Oh that and it might effect my credit rating.

krisskross

So it seems that the banks should not pay out anything if the funds are not there thus avoiding anyone being in the position of accruing bank charges.

So what happens when a mum is in Tescos buying food and her card is declined because of insufficient funds? Are the banks the bad men because children are having to go without food? What about declining the DD for the electric company who then insist on a prepayment meter so the electric costs significantly more.

I do think the banks will have to pay money back that they have taken for charges but I can also see an awful lot of people who will be relying on post office type accounts with no DDs or debit cards available. Inconvenient for those people whose local post office closes.

MarkyMarkD

Martin

Some of your quotes are very old-hat and you haven't updated them to deal with most of the common objections. You might not like the objections, but some of them have substance.

MSE_Martin wrote:

Q. “Wouldn’t a bank charges payout be a nightmare for the economy, after all many big banks are now publically owned?”

The answer to this is naive and illogical. A £10bn (or whatever) "payout" will come straight from the banks' capital. They don't have enough capital - that is the reason for the government "bail-out". Taking £10bn away means that they are £10bn short - and will need recapitalising once again. So your £10bn boost to the economy will take £10bn out of the economy in some other way.

MSE_Martin wrote:

Q. “Why should people who’ve abused their bank accounts get this money back leaving those who’ve behaved rightly to pay for it?”

Your answer to this is a politician's answer which answers a question which was not asked. You appear to have no answer for the argument that those who have run their accounts properly will quite possibly end up in a worst-off position because of those who have not.

MSE_Martin wrote:

Q. Hasn’t bank charge reclaiming hit the national fibre, leading to a compensation culture?

Of course it has. It has not done what you claimed - educated the elderly, and naive, who trusted their banks - because those are not the people who incurred charges, nor those who have "claimed". They read articles about "claiming" and don't think - "the banks are awful - I should never have trusted them". They think "look at those spendthrifts trying to make someone else pay their bills".

MSE_Martin wrote:

Free banking doesn’t exist so how can it end?

This is just semantics. Banking is free for 75%+ of customers who run their accounts properly, and most of those 75%+ understand perfectly well that it's free if in credit.

MSE_Martin wrote:

If I walked up to someone in the street, told them I was going to punch them, then punched them – the fact I’d prewarned doesn’t make my actions any more legal.

I'm really fed up with this "simile" mainly because it is not at all a valid comparison. Telling someone up front that you will charge them an amount of money, if they do something, is not the same as punching them on the nose. Charging them an amount of money is only claimed to be illegal. Punching them on the nose definitely is.

MSE_Martin wrote:

Yet in the main the questions a disgusting slur on the millions who’ve had charges. I got involved in the campaign to reclaim bank charges after meeting a single mum, a carer for her autistic son. She NEVER overspent, but a benefits office glitch meant it paid out late, so five direct debits bounced, meaning nearly £200 of charges.

In a situation like this, or late payment from an employer, or whatever, then the responsible party should repay the charges immediately. I don't see why the bank should be seen as the guilty party here - it is the DWP, or the employer, or whoever.

This example is simply a smokescreen to cover the fact that most bank charges are caused by poor budgeting or over-spending, not by late benefits or late pay.

If the woman had reclaimed her charges from DWP, they wouldn't have got to £3,000.


Regarding your comments about people being unable to control payments by DD, that's rubbish. Most DD payments are fixed monthly amounts, which are due. Not paying them by DD - on time - generally means paying them late. Stealing from one creditor - by paying them late - because you have cashflow problems isn't a form of good money management, it's robbing Peter to pay Paul.

People should accept that their fixed outgoings are their fixed outgoings. They need to manage their variable income (if it is indeed variable) and variable outgoings, not constantly pay bills late if there is not enough money "in the pot".

bluey890

In my opinion the vulnerable need protecting. Given how long Terms and Conditions are nowdays.
I would guess that not many people read them all.

auntymabel

You go to an ATM and try to take out 100.00 but the transaction is refused as you only have 99.00 in your account. Someone tries to take a Direct debit payment of 100.00 from your account but the transaction is refused as you only have 99.00 in your account. What is the difference except that you are charged nothing in the first example and 30.00 in the second?

Orford

MarkyMarkD wrote: »

This is just semantics. Banking is free for 75%+ of customers who run their accounts properly, and most of those 75%+ understand perfectly well that it's free if in credit.

.

Although it is free for a/c customers in credit, that doesn't mean that those a/c's don't cost the banks anything to provide, and the banks recover those costs by, in essence, overcharging the other 25%.

This cross subsidy was openly admitted by the banks in the HoL appeal.

If everyone ran their a/c's responsibly, which is what you seem to want, your 'free' bank a/c would disappear very quickly, but of course you don't really want that to happen, because then you would have to pay the true cost of running a bank a/c. Meanwhile you continue to pour scorn on all those who are helping to subsidise your a/c

Generali

Bank charging should be transparent and legal, not opaque and illegal as it is at present.

I disagree with Martin and think that bank accounts will almost certainly become charged for as a result of this change. Also, the repayment of these charges will be a transfer of funds from the UK taxpayer to those who have run their accounts badly. However, the UK taxpayer has agreed (via their elected representatives) to take on all the liabilities of the banks.

On the original topic, I can't think of any angle that has been omitted, I just don't agree with all the answers to the questions but then I'm an argumentative begger!

baileysbattlebus

michaels wrote: »

So rather than ring up and move the Direct Debits to the next day she chose to go on paying charges for several months that she is now no doubt trying to reclaim?

The first she would know would be a letter several weeks later telling her she was being charged for being overdrawn - because on her statement the payments and dd's appeared on the same day. As far as she knew everything was fine.

She used to ring up every time she received a letter and every time they said the charges would stand - it was months before she knew what was actually happening - and that was only because someone in the call centre was kind enough to tell her how it worked.

Once she knew she was able to sort things out and move the dd payments when necessary.

And no she hasn't claimed any charges back and as far as I'm aware isn't going to. This happened a few years ago - when her child was a baby - he is 8 now and she has been in full time employment for years. And she is not the 19 year old she was then - now if the same thing happened she would have argued her case but then she didn't - she accepted what they said.

My point was that although they could see a payment - which apparently got credited to her account at about 5am - they still paid (and charged for DD's) that went out of her account at 3am - pretty harsh I thought.

That and the fact that a basic bank account has no overdraft facility. But they put her into overdraft. Although on her statements it didn't look as if she was overdrawn - as the transactions happened on the same day.