The future of banking on the back of reclaiming Discussion Area

Tim_L

M_Thomson wrote:

Increased APRs on credit cards are a response to having to lower charges.

APRs on credit cards have always been extravagant - it's in the nature of credit cards, and lenders know that the people who build up debts on credit cards tend not to even know what the APR is: they pay for convenience rather shopping around for the best rate, within reason - pure rate tarts who will tend not to pay interest anyway so the APR is irrelevant. So APRs can be pushed up without much worry of losing customers.

In any case an increased rate for credit is a perfectly fair way of charging people who use it without affecting those who do. There are many better ways of getting loans at much lower APRs for those who are careful at managing money.

There was a very large push for market share by card issuers when interest rates were very low over the last couple of years, and hence the 0% offers and so on. It's probable that the competition this introduced has had much more of an effect on squeezing of profit margins at the card issuers than the refunding of unlawful fees which is a fairly recent phenomena as a mass activity. APRs were really bound to go up following this period as companies attempt to cash in on their investments in customer recruitment.

But here's the rub: anything consumers do en masse to reduce their costs or make money, whether this is rate surfing, stoozing, initial incentive bagging or reclamation of unlawful charges, will have an effect on a financial institution's profit, and hence if they are to maintain margins someone gets to pay for it. The very fact of this site's existence, and the fact that probably 100,000 people get the newsletter and a good proportion act on it, has a very significant effect on the way banks operate.

Singling out charge reclamation as the one thing that will cause banks to charge more for other services is really just to pick out a convenient scapegoat, since I think most of the people taking a hard line on it are those who measure themselves by their ability to manage their money and rather look down on those that can't or don't; it allows them to ignore the prudent things they are doing that also cost banks money. There is also the question that it can create a self fulfulling prophecy: if people start accepting the idea that a bank might start charging for current accounts because something like charge reclamation is happening en-masse, then it's easier for the banks actually to do it. Though I think in the UK charging for current accounts is a long way off because of competitive pressures.

The fact of the matter is that most opinion now accepts that penalty charges are unlawful, and so until the banks successfully challenge this notion in court, they will be refunded. This is the business of those being charged and the banks to sort out, and they should be left to get on with it frankly.

Hazzanet

I've been reading with interest all of the stories and articles regarding the reclaiming of bank charges. Here's a question: What if bank's re-drafted their T's and C's to dress up the charges as something else... so for example:

"By issuing a payment which would result in you becoming overdrawn or exceeding any agreed overdraft limit, you are agreeing to purchase our 'Bounced Payment' service, and we will return the item unpaid. The cost for each use of the 'Bounced Payment' service is £35."

So in this case, you are not being penalised for a bounced cheque or whatever, you are simply agreeing to purchase a service, for which there is a stated tariff. Any legal experts out there who could comment on this approach?

Cheers

Hazza

powerful_Rogue

Lets go back to receiving our wages "cash in hand" at the end of every month.
If its not in the jar then you cant spend it.

Oh, I forgot, we cant, it has to be paid into a bank account.

Paul_Herring

Hazzanet wrote:

I've been reading with interest all of the stories and articles regarding the reclaiming of bank charges. Here's a question: What if bank's re-drafted their T's and C's to dress up the charges as something else...

I've already mentioned (else-thread) not dressing them up, simply stating plainly in the T&C's that it's a penalty: http://forums.moneysavingexpert.com/showthread.html?p=2411395#post2411395

It got one 'thanks', and one direct reply - no-one else appeared to show an interest, either for or against.

Hazzanet

Paul

I think from the bank's point of view it wouldn't work that way. My limited understanding is that when there is a liquidated damages (penalty) clause in a contract, a court will enforce the 'reasonable' costs incurred by the injured party, but not what is over and above those 'reasonable' costs.

In most of these cases, we're looking at c£25-£35 a bounced cheque, and in reality I don't think it costs that for a computer to say there isn't enough money in an account and for someone to stamp "Refer to Drawer" on a cheque, which is why the banks don't normally defend the cases - they know it's an unreasonable penalty clause.

My argument is that if you go into Asda and buy a bottle of Coke, it might cost you 99p, whereas the same bottle at the corner shop might cost £1.35, but we can't sue the corner shop for the 36p as it's a product, and you agreed to pay that price. If banks were to change their T's and C's to say that a particular action by a bank customer (e.g. writing a cheque when there are insufficient funds in the account), amounts to acceptance of an offer of a service (in my example, the 'bounced payment' service), and that the cost is £35 a shot I don't think it's really a penalty clause any more. In fact, there's intention to create legal relations, capacity to contract, offer, acceptance and consideration - possibly all the requirements of an entirely separate contract.

Like I say, I'm certainly no legal expert, but I would be interested in whether I've got the wrong end of the stick or not?!

Hazza

Mark7799

powerful_Rogue wrote:

Lets go back to receiving our wages "cash in hand" at the end of every month.
If its not in the jar then you cant spend it.

Oh, I forgot, we cant, it has to be paid into a bank account.

What is there to stop anyone opening a basic account with a cheque book, no direct debits, no cards of any nature, receiving their payslip and going to the Bank and cashing a cheque for their full balance once a month?

As an alternative, can't a passbook building society account be given to receive a salary? or even just a bank savings account that allows cashcard access?

bookworm1363

oldwiring wrote:

This is my opinion that I have already posted in abother thread

And I answered you there, and will say it again: There HAVE been so fairly large claims, and the banks still are not prepared to defend themselves in court. There have been cases which could have been taken out of small claims, and the banks didn't push it. There have been cases where the judge decided to take it out of small court, and YET the banks didn't defend.

At some point, you will have to accept that the "uneconomical to defend" answer does not work.

bookworm1363

Hazzanet wrote:

I've been reading with interest all of the stories and articles regarding the reclaiming of bank charges. Here's a question: What if bank's re-drafted their T's and C's to dress up the charges as something else... so for example:

"By issuing a payment which would result in you becoming overdrawn or exceeding any agreed overdraft limit, you are agreeing to purchase our 'Bounced Payment' service, and we will return the item unpaid. The cost for each use of the 'Bounced Payment' service is £35."

So in this case, you are not being penalised for a bounced cheque or whatever, you are simply agreeing to purchase a service, for which there is a stated tariff. Any legal experts out there who could comment on this approach?

Cheers

Hazza

The "you're purchasing a service" tactics have already been tried out by the banks, and it is a tactic well known to the legal circles: They call it "cloaking the penalty". Says it all, really, don't you think?

hobo28

Just to add my tuppence worth. I think its extremely interesting that the banks will not defend themselves. At first glance it sounds like they can't justify the charges.

However, I work for a large company. A huge one. You should see the costs for implementing a large computer system. Even without the security a bank would need. Its not just the computer, that usually is a fraction of the cost. Its the people who install it, those who look after it, the people who use it, the training, servicing, disaster recovery etc. etc. etc. The list goes on. Printing that letter isn't just the cost of the paper, ink and a stamp.

Would it mount up to be able to justify a £20 charge given the number of people involved? There's the question.

I suspect the banks don't want to take the gamble that some judge could set a very dangerous precedent for them rather than the charges are way out of proportion.

What I don't understand is why people think they are entitled to a FREE bank account, FREE withdrawls, FREE debit cards/chequebooks etc. oh and interest on their accounts. We are very lucky we do. Like a poster said on page 1, the US has a much tougher regime where you pay to access your own money.

Banks are here to make money at the end of the day. Whilst I sympathise with those who thru no fault of their own end up in overdraft, its not the banks fault so why should they subsidise everyone.

Giving people free overdrafts is a great idea for some but all your doing is moving the goalposts. If the OD was -£100 then people would moan at -100.01 instead of £0.

Hereward

hobo28 wrote:

However, I work for a large company. A huge one. You should see the costs for implementing a large computer system. Even without the security a bank would need. Its not just the computer, that usually is a fraction of the cost. Its the people who install it, those who look after it, the people who use it, the training, servicing, disaster recovery etc. etc. etc. The list goes on. Printing that letter isn't just the cost of the paper, ink and a stamp.Would it mount up to be able to justify a £20 charge given the number of people involved? There's the question

I don't want to detract from a very good post, but are the computer systems used in the banks the same ones that are used for other things? For example, producing statements and moving money about. These activities must also have some of the costs assigned to them; therefore, account holders how have a positive balance and move a lot of money about to keep it that way are costing the banks more, as I'm pretty certain that there are more people who manage their accounts efficiently than there are those who do not.