The future of banking on the back of reclaiming Discussion Area

Hazzanet

bookworm1363 wrote:

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?

A slightly narrow-minded view in my opinion. I understand that people think these charges are high, but if you were only charged £2 a shot for a bounced cheque, or for going over an overdraft limit, what incentive is there to keep to the agreement? Very little I'd suggest.

I think the courts should be looking to encourage people to stick to contracts, after all, people who open these accounts have had the time to read the agreement, and to sign it. By breaking the agreement, they are effectively going against their word, and then by attempting to reclaim the 'unfair' bank charges they're just making their word worthless.

I'll stick my neck out here and say that I'd be 100% behind any court which upholds these charges and rules that they are fair. Customers go into banks and sign these contracts and then default on them. It's not actually fair on the bank for a customer to break the contract that was entered into on good faith, so what's wrong with a bank being a tad unfair back to the customer?

Perhaps people who exceed their overdrafts, ie take money without the banks consent, should just be charged with theft? That'll stop it dead.

Hazza

Chrysalis

Hazzanet so in your opinion a contract can overule general law?

If someone agrees to such a contract they themselves are to blame.

I am not attacking you I just want you to confirm your standing on this thanks.

Hazzanet

Chrysalis wrote:

Hazzanet so in your opinion a contract can overule general law?

If someone agrees to such a contract they themselves are to blame.

I am not attacking you I just want you to confirm your standing on this thanks.

No, I'm in no way saying that. The general rule of law is that a party to a contract who is 'injured' by a breach of contract by the other party has a right to recover resonable costs incurred from that other party to put them back into a position as if the breach had not occurred.

The problem here is that if this is strictly applied to bank penalty charges, they fail to deal with the problem that they were put there for in the first place. For example, if a speeding fine is £10, you would be more inclined to speed as it wouldn't sting you as hard as a £60 fine.

With a bank's punitive charges, if they were brought down to where it reflected the bank costs only, you would be more inclined to flout your overdraft limit "'cos it'll only cost me three quid" etc. The idea of them is that it hurts, so you won't do it again.

The other thing is that punitive charges aren't in themselves 'illegal' - within reason you can sign yourself up to pretty much anything in a contract that doesn't contravene statute or is deemed criminal, however courts generally won't enforce these types of charges.

The thrust of my point is that the charges are there to put you off breaking your contract with the bank. If I say that I agree to something, I give my word and stick by it. People who break their agreement with the banks are simply going back on their word, and this is isn't in the spirit of a contract. Furthermore, attempting to recover the 'punitive' charges simply shows that their agreement to something isn't worth the paper it's written on.

I know that some people break their agreements because of serious problems, but many get stung by banks through poor money management, and a lack of care for their finances. I feel that in the cases where it could have been avoided by better financial management by the individual, the courts should uphold the bank charges, and thus uphold the spirit of entering into a contract - promising to do something.

Hereward

Hazzanet wrote:

With a bank's punitive charges, if they were brought down to where it reflected the bank costs only, you would be more inclined to flout your overdraft limit "'cos it'll only cost me three quid" etc. The idea of them is that it hurts, so you won't do it again.

What about the authorised overdraft rate, isn't that punitive enough? The banks, and building societies, could just apply the the unauthorised rate on the whole overdraft as disincentive to break your agreed limits, rather than on the amount over your limit. If this was coupled with realistic charges to breaking your limits, would it be fair comprimise?

Chrysalis

Hazzanet wrote:

No, I'm in no way saying that. The general rule of law is that a party to a contract who is 'injured' by a breach of contract by the other party has a right to recover resonable costs incurred from that other party to put them back into a position as if the breach had not occurred.

The problem here is that if this is strictly applied to bank penalty charges, they fail to deal with the problem that they were put there for in the first place. For example, if a speeding fine is £10, you would be more inclined to speed as it wouldn't sting you as hard as a £60 fine.

With a bank's punitive charges, if they were brought down to where it reflected the bank costs only, you would be more inclined to flout your overdraft limit "'cos it'll only cost me three quid" etc. The idea of them is that it hurts, so you won't do it again.

The other thing is that punitive charges aren't in themselves 'illegal' - within reason you can sign yourself up to pretty much anything in a contract that doesn't contravene statute or is deemed criminal, however courts generally won't enforce these types of charges.

The thrust of my point is that the charges are there to put you off breaking your contract with the bank. If I say that I agree to something, I give my word and stick by it. People who break their agreement with the banks are simply going back on their word, and this is isn't in the spirit of a contract. Furthermore, attempting to recover the 'punitive' charges simply shows that their agreement to something isn't worth the paper it's written on.

I know that some people break their agreements because of serious problems, but many get stung by banks through poor money management, and a lack of care for their finances. I feel that in the cases where it could have been avoided by better financial management by the individual, the courts should uphold the bank charges, and thus uphold the spirit of entering into a contract - promising to do something.

I think you will find people agree to these contracts because they have no choice. Its not a simple matter of saying no and going elsewhere because every single bank has these clauses, if you want a bank account you have to agree.

Its unlawful to charge excessevely for penalty fees, setting them high as a detterent is pointless if the account hlder is in a neverending trap, how is one supposed to get their account back in order if the bank keeps piling up charges? too many people assume people have only themselves to blame and their account problems are in their own control. If only life was that easy.

Remember the banks are not clearing the payments and providing a service, the payments are still been blocked and as such the customer is getting away with nothing, blocking a payment is not a service. a contract can be deemed illegal, I guess in this case since the banks are not defending in court their contracts are illegal. The only reason why they still in place is because the regulator stopped 1 step short of enforcing it.

The fact is banks are lying to customers. The charges are for profit purposes, without them its likely free banking wouldnt exist and possible they would withdraw services to vulnerable people. It wouldnt surprised me that the banks have threatened to do this in private and so the law wasnt enforced up on them, and the public left to fight their own battles.

Hazzanet

Chrysalis wrote:

I think you will find people agree to these contracts because they have no choice. Its not a simple matter of saying no and going elsewhere because every single bank has these clauses, if you want a bank account you have to agree.

Its unlawful to charge excessevely for penalty fees, setting them high as a detterent is pointless if the account hlder is in a neverending trap, how is one supposed to get their account back in order if the bank keeps piling up charges? too many people assume people have only themselves to blame and their account problems are in their own control. If only life was that easy.

Remember the banks are not clearing the payments and providing a service, the payments are still been blocked and as such the customer is getting away with nothing, blocking a payment is not a service. a contract can be deemed illegal, I guess in this case since the banks are not defending in court their contracts are illegal. The only reason why they still in place is because the regulator stopped 1 step short of enforcing it.

The fact is banks are lying to customers. The charges are for profit purposes, without them its likely free banking wouldnt exist and possible they would withdraw services to vulnerable people. It wouldnt surprised me that the banks have threatened to do this in private and so the law wasnt enforced up on them, and the public left to fight their own battles.

Chrysalis,

I think you're missing my point here. No bank is going to provide a contract which says "and you can exceed your overdraft limit at any time, and issue cheques willy-nilly". My point is that when you take on the responsibility of having a bank account, you have given the bank your word that you will operate it within previously agreed limits.

By exceeding these operational limits, you are indeed breaking your word. If you review my earlier post, I've acknowledged that people do have financial problems occasionally, however normally a chat with a bank can help, but only before a customer gets themselves into a position where penalty charges begin to be applied.

I've taken your point on board about charges piling up, but I'm trying to relate to those who just don't take proper control of their finances. People who get in to trouble because of redundancy (I've been there), sickness etc need to talk to the bank and explain the situation. Mine was very helpful in my time of need (Smile), and I never got slapped with a single fee.

Perhaps an alternative model should be in place for those who aren't in control of their finances? Take their chequebook away after a second bounced cheque, and then their debit card after a second overdraft breach? I'm sure you'll agree that an approach such as that would make life even more difficult than a painful £25 here or there. Maybe even take A&L's approach and give you your 30 days notice.

Hazza

Hazzanet

Hereward wrote:

What about the authorised overdraft rate, isn't that punitive enough? The banks, and building societies, could just apply the the unauthorised rate on the whole overdraft as disincentive to break your agreed limits, rather than on the amount over your limit. If this was coupled with realistic charges to breaking your limits, would it be fair comprimise?

Agreed, it's a possible alternative, but for those with small overdrafts, eg: £100, would it sting them hard enough? On large amounts it would hurt like hell, but for the small-time overdraft 28% on £100 only amounts to about £2.50/a month. If I was just coming up to pay day, and was so inclined, I'd probably take that on the nose and not worry about the cost for a couple of days.

They'd have to crank the unauthorise o/d rate to about 60% p.a. to have the desired effect on the smaller borrowers.

Hereward

Hazzanet wrote:

Agreed, it's a possible alternative, but for those with small overdrafts, eg: £100, would it sting them hard enough? On large amounts it would hurt like hell, but for the small-time overdraft 28% on £100 only amounts to about £2.50/a month. If I was just coming up to pay day, and was so inclined, I'd probably take that on the nose and not worry about the cost for a couple of days.

They'd have to crank the unauthorise o/d rate to about 60% p.a. to have the desired effect on the smaller borrowers.

I know that it would only be a "tiny" amount on small overdrafts, but the majority of people with low limits have them for a reason: normally that have very bad credit ratings or low incomes; therefore, £2.50 per month is a lot of money to them, espeically as the bank would still be able to charge them for declined transactions (FSA stated, I believe, that £12 was a reasonable amount). This charge whould then be at least £14 per month, more if they have more that one transaction declined.

MPH80

Hereward wrote:

I know that it would only be a "tiny" amount on small overdrafts, but the majority of people with low limits have them for a reason: normally that have very bad credit ratings or low incomes; therefore, £2.50 per month is a lot of money to them, espeically as the bank would still be able to charge them for declined transactions (FSA stated, I believe, that £12 was a reasonable amount). This charge whould then be at least £14 per month, more if they have more that one transaction declined.

But isn't this all what happens now - just with apparently unlawful amounts on the charges?

schiff

May I thank Hazza, Hereward & Chrysalis for some excellent recent posts. They give a refreshing contararian view.

This claiming frenzy has been sparked off by Martin (will I get banned??) and people are getting sometimes huge sums back for actually behaving in an irresponsible way. It has needed to be said and I started something like this elsewhere - though it perhaps goes against the grain with the general thought processes of MSE! I was comforted to read that there are a lot of us of like mind (as I had guessed).

I wince sometimes at the proposed method of getting an advantage, promoted by MSE. Do something, wait till you get the reward, then kick the reward giver into touch ASAP. It goes against the grain with me, though I do take advantage of the rewards that are on offer. However I do try to give a bit back eg by keeping a bank account open for a while at least, that has given me a, sometimes very handsome, reward.

Problem is I'm a Libran and we like both sides to be happy. Generally I find it unachievable, which leads to us not being able to make our minds up! It's tough, I tell you!

schiff