Why do banks allow unauthorised overdrafts anyway?

ganonman

simon_templar wrote: »

The buck stops with the account holder, it is not the job of the bank to control the account holders spending habits.

Why is it not the job of the bank as well as the account holder?

Technologically, they are capable of not giving money to people when they don't want to.

They make substantial profit from giving money to people that they shouldn't be giving money to.

fatlad9

mr.brightside87 wrote: »

I didn't mean any offence though matey.

I was just saying that it was my choice for going back to education and now it's put that at jepordy thanks to the banks and their extortion

hehe it's alright mate. i left uni after the first year quite some time a go. was hoping to use my £2k "refund" to actually clear all my little debts and then enrol on a course at northumbria uni next year part time, and drop my hours at work slightly. might still do that, but it will be harder with my !!!!!! job paying peanuts!

Charlie94

simon_templar wrote: »

You could ask why do account holders put themselves in a situation that makes them go over their agreed limits?

Well you could ask that but that has nothing to do with the question being asked in the thread.

You can tell when the people who defend the court case decision argument tends to fall apart when they conveniantly refuse to answer this question.

I suspect that even they know. Its clearly to make money out of peoples mistake or hardship. Something that some of them seem to think is perfectly reasonable. If the bank are so bothered by excessive overdraft charges the soloution is very simple. Stop allowing people to exceed thier overdraft.

This won't happen of course as the banks are extremely happy with profits they are making with excessive charges. The court case has ensured this deplorable act will continue.

natweststaffmember

willo65 wrote: »

If you have as an example a d/d for car insurance going out and will take you only £5 o/d would you prefer they bounce it and you are uninsured or as its only £5 pay it for you?

Willo, we sometimes look at our international friends and look for comparisons. I won't look to Europe but to the USA which recently changed their regulation on banking for what is called "overdraft services". Effectively, banks have to seek the customers explicit wish to use these services, and this means when they are overdrawn and when the bank have not authorised a limit. If they have no OPTED IN(no automatic opt in such as the Barclays reserve useage fees) then ALL payments are declined outright and no fee is charged by the bank. To answer your question, would I want to be not insured? Yes I would because the company would write to me to tell me and I would hope I would know that it has happened as well as I would have hopefully checked my balance.

111222

Regarding going overdrawn on an electronic bank transaction, i.e chip and pin.

It is a bit of a mystery and then again not, in the days of cheques people could more genuinely go overdrawn, maybe the cheque wans't cleared for days and the person takes out more money(knowingly yes) but still there was more possibility and uncertainty involved with cheques and this genuinely would have cost the bank money in admin time and so on.

But once the electronic bank transitions came into place the banks probably realised that they would lose this huge source of money(bank charges) as theoretically there is no need to ever go overdrawn on an electronic bank transaction.

Electronic bank transaction are done at a point-of-sale (POS) terminal btw, the gadget you put your bank card into and then type your pin and press enter, these teriminals work exact the same way as a PC works, and they connect to the bank using broadband just like we would connect to the internet.

My own bank told me that it is the fault of the retailers/seller as they have a "pool" that they allow you to go overdrawn by, they said £20. So that if you had say £30 in the bank an you bought something for £32 via a chip and pin termial at the supermarket(or whatever shop) then it would still go through, my bank said that it costs the retailers money to check how much exactly you have in your bank so they set up this "pool" amount that you can basically go overdrawn by.

Now this "pool" is just nonsense what the bank were saying as the retailers have to contact your bank anyway during the transaction and they can easily see exactly how much money you have in your bank. It is actually the most simple computer calculation there is. I could program a chip and pin style POS terminal system in about 10 minutes.

When you buy something you put in your card to the POS terminal and then type in your pin etc and press enter. The POS then dials up the retailers own master computer(server) (just the same as a computer would do with something like MSN messenger believe it or not) the retailers server then dials up the banks server and hence after all the authentication is passed gets direct access to your bank balance to see how much you have in, now there is NO ambiguity here it can easily see what your available balance is and this is all done in a matter of seconds.

It is exactly the same kind of idea as logging intosay your own online banking where it tells your your available balanace.

The data is then then compared to the price of the sale and again it is the most basic computer operation to subtract 2 number so if the sale is £20 and you have £19.50 in the bank then the result is £-0.50 now anything -(minus) should raise the red flag and decline the sale but does it NO. Why not, well that is the big mystery either the bank is purposely allowing the sale to go thorugh knowing very well that it will result in a bank charge or the retailer is allowing the sale to go through basically so that they get a sale out of it.

As long as the "pool" is kept at a reasonabe level then they kind of justify the whole process, the "pool" may be smaller than £20 is my experience for me the "pool" has been closer to about £2, still £2 can result in a £35 charge. So somewhere down the line the banks/retailers know what they are doing, they do not have to process a sale if it results in your bank balance going into a -ve number but yet they still knowingly do this.

[Deleted User]

simon_templar wrote: »

The buck stops with the account holder, it is not the job of the bank to control the account holders spending habits.

Au contraire, I'm afraid.

You have to understand - however rude it may sound - that the British public is not as bright as everyone thinks. That's not meant to be offensive, but it's an important note and explains why much legislation protecting consumers is in place.

We make tobacco companies place warnings on their packets, because we feel that consumers don't understand the risks.

We make ISPs responsible for blocking child abuse content because we can't rely on the users to police it.

We make supermarkets restrain from advertising alchohol, because we can't rely on users not to be tempted.

There are thousands of examples like this where the industry is regulated because the consumer can't be trusted not to be tempted, so why is the banking industry any different?

Debt is - I would argue - just as dangerous as drink or drugs, yet why do we restrain the tobacco and drinks industries from tempting customers with their products whilst not regulating the banking industry who are fine to offer unauthorised overdrafts on a plate.

I just don't like the whole semantics of it: if it's 'unauthorised', why is it allowed?

dzug1

2_litre wrote: »

Banks have allowed early payments to be paid on DD then charged the account holder even when it isnt there fault. How is that going over their agreed limits ?

Well it's not the bank's fault either - it's the originator of the DD.

DDs are for unspecified amounts on unspecified dates - the bank has no knowledge that the DD is being applied for early and so applies its normal rules.

dzug1

MrLeeLee wrote: »

They are utter utter scum, no other words for them, but we have no option to use them.

No option? It's perfectly possible to live without a bank account. Not something that I'd want to do, but possible.

And if you have just a basic bank account, then it's easy.

ILW

natweststaffmember wrote: »

Willo, we sometimes look at our international friends and look for comparisons. I won't look to Europe but to the USA which recently changed their regulation on banking for what is called "overdraft services". Effectively, banks have to seek the customers explicit wish to use these services, and this means when they are overdrawn and when the bank have not authorised a limit. If they have no OPTED IN(no automatic opt in such as the Barclays reserve useage fees) then ALL payments are declined outright and no fee is charged by the bank. To answer your question, would I want to be not insured? Yes I would because the company would write to me to tell me and I would hope I would know that it has happened as well as I would have hopefully checked my balance.

I believe that in the USA, writting a cheque without the funds to cover it is a criminal offence that can end up in a prison sentence. I think your usual bank customer tends to be a little more careful because of it.

mailmannz

willo65 wrote: »

If you have as an example a d/d for car insurance going out and will take you only £5 o/d would you prefer they bounce it and you are uninsured or as its only £5 pay it for you?

Honestly, thats how it should work. If you dont have the money in the account then the bank doesnt process any payments that would take you in to over draft.

The reality is though that there is no money in it for the banks to do this. Why would they when they can cream an easy £39 off you for going over drawn.

Mailman