MSE News: Bank charges update: the phoenix from the flames + full Q&A

Alpine_Star

Centium5000 wrote: »

In European case law the European Court of Justice has actually set out 3 criteria for Collective Dominance:

http://www.globalcompetitionpolicy.org/index.php?&id=1852&patvyywc=patvyywc&action=907

1. The existence of a collective position

(All the banks party to the Supreme Court case had a shared position, and this was furthered outside court via their BBA spokespeople - evidence of coordination)

2. The collective position being dominant

(The banks collectively have a 90%+ share of the Personal Current Account Market - well over the 40% marker JohnDinton mentions above, thanks for the prompt John )

3. There is abuse by the collective dominant entity

(This is the hardest to demonastrate normally. However, fairness of pricing can be considered under the Competition Act, unlike the UTCCR as it is directly pertinent to the question of abuse)

So, although there has never been a case like this before, the legal groundwork for it has already been laid, and there's never been such a clearcut fulfillment of the three criteria.

This is the perfect case for Chapter 2 of The Competition Act (which implements the European Article 82).

Just need someone / the OFT to be brave enough to take it to court.

They may find their pay cheques bounce the morning after though(!) :P

There is no doubt that banks conspire to fix the price of unauthorised overdraft charges across the industry and this was admitted, albeit unwittingly, by a senior director of Lloyds during a House of Commons committee hearing in March but unfortunately they didn't pick up on it.

See answer to question 336 http://www.publications.parliament.uk/cgi-bin/newhtml_hl?DB=semukparl&STEMMER=en&WORDS=oft%20bank%20charg&ALL=oft%20bank%20charges&ANY=&PHRASE=&CATEGORIES=&SIMPLE=&SPEAKER=&COLOUR=red&STYLE=s&ANCHOR=muscat_highlighter_first_match&URL=/pa/cm200809/cmselect/cmscotaf/c319-ii/c31902.htm#muscat_highlighter_first_match

''The banking industry has generally come to an agreement that they will charge certain amounts for overdraft letters''

Morglin

These cartels operate al over the place, from supermarket goods to banks - which is why, if this case had gone the way of the reclaimers, we would all have been paying bank charges within a short time - once one bank had announced this, the others would have followed, and it would not have been a case of 'just change banks'.

Lin

natweststaffmember

Morglin wrote: »

These cartels operate al over the place, from supermarket goods to banks - which is why, if this case had gone the way of the reclaimers, we would all have been paying bank charges within a short time - once one bank had announced this, the others would have followed, and it would not have been a case of 'just change banks'.

Lin

lin, but would they really have done this? They could easily increase overdraft rates, charge for debit cards or paper statements etc,etc, The UK Retail banking sector makes more money than any other EU country(and they charge for banking). Why would a decrease in one form of revenue(it's already happening at barclays, RBS Group etc.etc.) lead to a sudden rush to increase revenue from current accounts?
I don't buy that argument at all since the judgement would not have lead to NO CHARGES but to FAIRER charges and by definition lower charges. A reduction not a complete wipe out of fee income.

Centium5000

Alpine_Star wrote: »

There is no doubt that banks conspire to fix the price of unauthorised overdraft charges across the industry and this was admitted, albeit unwittingly, by a senior director of Lloyds during a House of Commons committee hearing in March but unfortunately they didn't pick up on it.

See answer to question 336 http://www.publications.parliament.uk/cgi-bin/newhtml_hl?DB=semukparl&STEMMER=en&WORDS=oft%20bank%20charg&ALL=oft%20bank%20charges&ANY=&PHRASE=&CATEGORIES=&SIMPLE=&SPEAKER=&COLOUR=red&STYLE=s&ANCHOR=muscat_highlighter_first_match&URL=/pa/cm200809/cmselect/cmscotaf/c319-ii/c31902.htm#muscat_highlighter_first_match

''The banking industry has generally come to an agreement that they will charge certain amounts for overdraft letters''

Fantastic research work Alpine Star.

Added to the rest of the evidence, that should leave it in very little doubt that these charges are by agreement between firms in a dominant position.

Chapter 2 is looking more promising all the time - almost like it was designed for this case!

Alpine_Star

Centium5000 wrote: »

Fantastic research work Alpine Star.

Added to the rest of the evidence, that should leave it in very little doubt that these charges are by agreement between firms in a dominant position.

Chapter 2 is looking more promising all the time - almost like it was designed for this case!

For what it's worth, in last week's Question Time Lord Falconer - in the context of overdraft charges - was unequivocal in saying that the banks operated a ''cartel''.

Watch the 4th question option - 'Banks' http://www.bbc.co.uk/programmes/b00p36jw#p005c7wb

Centium5000

Alpine_Star wrote: »

For what it's worth, in last week's Question Time Lord Falconer - in the context of overdraft charges - was unequivocal in saying that the banks operated a ''cartel''.

Watch the 4th question option - 'Banks' http://www.bbc.co.uk/programmes/b00p36jw#p005c7wb

Wow!!

When the former Lord Chancellor says something as clear-cut as that there can't be much doubt about the legal basis for his statement.

He starts his comment around the 37 minute mark if anyone wants to find it quickly.

Being a cartel would bring banks under Chapter 1 of the Competion Act, but I really hope they go for Chapter 2 which they also qualify for.

The reason is Chapter 1 can have exemptions made, I believe, whereas Chapter 2 is hard and fast abuse.

Can't believe I missed QT this week - thanks for paying attention on our behalf

jamesbr66

MillaJoJo wrote: »

I knew it wasn't the end despite the banks and the media carefully wording thier statements.

The banks may think they have won, however a large number of their customers remain unhappy, if you have a large number of unhappy customers I fail to see how that be classed as a win.

I have heard both sides of the argument, those that feel strongly people should be penalised for going overdrawn, missing a direct debits etc and those of course who feel these fees are far too high and not in line with true costs. I think both have valid arguments, but you know the more I thought about it as a society we have been forced into a financial process that simply does not meet a large proportion of the populations needs.

There are without a doubt many ways people receive charges, sometimes it is through poor money management, others perhaps due to a change in circumstance and of course not forgetting the errors banks do make (they do get it wrong sometimes).

Those that rather smugly in my view are continually critical of consumers that receive bank charges (or penalties) really should take a broader view. If you are really fortunate enought to have more than enough liquid cash in your account not to worry about direct debits etc, then that is good news. How about the busy houewife, taking the kids to school, running a working household, possibly even working part time to supplement the family's income? Undoubtedly she will check her bank account several times a week, ensuring everything has been paid and what funds she has available and of course the information she received whether on-line, telephone or a mini statement will be correct will it not? It would be nice if it was but the banks just love to tell us about realtime and pending transactions that can take days to clear, so tough Mrs Housewife thanks for trying to manage your finances correctly, but we are still charging you £35 for bouncing your direct debit, and by the way thats another £30 for going over your overdraft limit!

Is that fair? And please lets not start with the 'technology restrictions', if it is so bad then perhaps they need to re-examine the whole process. Or perhaps they dont wish to fix it, it is afterall a nice little money spinner is it not?

Let us not forget the banks supporters shouting 'if you dont like it, don't bank with us' Really? and just where exactly can I bank where I dont have to agree to over inflated charges, silly me I cant!, every single bank has their own terms and conditions all of which relate to accepting fees for going overdrawn or missed items fees. I need a bank account so I therfore have zero choice but to agree to these conditions, that is really fair isnt it now?

And what about the wonderful direct debit scheme?, so efficient and well received, companies and banks cant praise it enough. I think it is a terrible scheme, particulalry in light of the missed item fees associate if one can not be paid from the bank account. Now when you setup a direct debit I bet you can remember the insitutions representative reading a script about the direct debit gurantee, perhaps they should add 'and by the way, if we cant take the money from your account on this date, your bank will charge you a ludicrous fee, perhaps even more than the amount we asked to debit from your account' Sorry but this is not a good scheme for those on a tight budget, especially as if you have many direct debits at different times of the month it can be hard to figure out if they have debited from your account, particulalry due to the ever so technologically advanced services offered to check your ballances and debits. Perhaps reclaimers should consider attacking the direct debit gurantee system, it does seem geared towards making money for the banks. Apologies to you guys out there who dont have that worry, its nice isnt it? Oh nearly forgot if you dont agree to pay by direct debit these days most orginizations hit you with a fee anyway, result or what?

At the end of the day folks if you have sufficient income to cover all your debits monthly without the need for a calculator, it doesnt matter. If on the otherhand you are on a tight budget, then I am afraid it is your responsobility to check your account daily for events that should have been recorded days ago to appear in your statement, I mean I know you are buys and have a life, but come on do it at say 4am when most banks do run their updates, I guess its cheaper and more cost effective for them to do so, and ensure you remain as stressed out as possible, the banks seem to like that, keeps you on your toes.

Are the UK's banks, financial institutions actually providing a service you would be willing to pay for?, are they really fair? Sure they are in business but there is such a thing called 'treating customers fairly' Incidentally I have received no bank charges for any reason personally that was my fault, but that is a long story that resulted in a case of wine from the bank and an apology - I dont even like wine!

Apologies if my spelling is out a bit, in a hurry!

MarkyMarkD

I haven't got time to read all the pages of this thread, although I've got through the first 200 posts.

Centium500 is making the invalid and I would guess almost definitely incorrect assumption that charges are incurred by "the most unfortunate" and hence that they are levied on those who make the fewest transactions.

I don't obviously have the data, but the banks do. And I would be not a jot surprised if actually quite a proportion of those incurring the greatest amount in charges are those who are quite reasonably off, but simply incompetent in managing their finances. Or those who have simply decided that it doesn't matter, because they'll "claim it all back".

There are, of course, those who initially went into unauthorised overdraft due to hardship related causes. In many of those cases, the cause of the hardship is another party who should have covered the full and consequential costs. E.g. if your benefits are late, due to no fault of your own, then DWP should reimburse the consequent bank charges so that you are fully compensated.

But to go round saying that it is mainly the unfortunate who are charged is probably wrong.

Regarding the unfortunate being unfairly charged because they don't undertake many transactions, I'd also beg to differ. Most better-off people have one or two BACS credits a month, lots of DDs, and a few internet banking payments. All of which cost the bank buttons to process.

Most "unfortunate" people get rather more than two BACS credits a month, have some DDs, pay lots of bills by cheque, take frequent ATM withdrawals (often not from their own bank) and do transactions over the branch counter. The "unfortunate" are a lot more costly for the bank.

That's not even accounting for lying balances, which are way higher on the "well-off" than the "unfortunate".

So, the other leg of the argument is also false or at least very unsound.

Centium5000

MarkyMarkD wrote: »

I haven't got time to read all the pages of this thread, although I've got through the first 200 posts.

Centium500 is making the invalid and I would guess almost definitely incorrect assumption that charges are incurred by "the most unfortunate" and hence that they are levied on those who make the fewest transactions.

Welcome to the discussion MarkyMark.

You'll have got the gist of the thread from the first 200 posts, but you might as well read the other (latest) 20-odd as that's where the discussion currently stands.

The charges don't need to be incident upon the most unfortunate in society to be unfair; they can be unfair on the basis that these are imposed by the banking industry collectively, not as a result of competition, and this leads to excessive pricing / terms which is a market distortion.

This is to the detriment of all customers who pay the charges, regardless of their financial status, and is contrary to the spirit of free-market economics which the western socio-economic systems are based upon. Such markets rely on competition to work, banking not being a natural monopoly, and actions that prevent competition are unfair on the consumer.

However, you're right, I do believe this weighs heavily on the most unfortunate and is unfair beyond what I've described above.

On your point about assumptions, I'm afraid you're incorrect - I've come to this conclusion by reading the OFT study and statistics:

http://www.oft.gov.uk/shared_oft/reports/financial_products/OFT1005.pdf

Bottom of page 80 highlights incidence of unauthorised overdraft charges:

48% of consumers with < £1000 in household savings
18% of consumers with > £1000 in household savings

Top of page 81 it highlights the incidence of unpaid item charges:

31% of consumers with < £1000 in household savings
15% of consumers on low incomes
11% of consumers on higher incomes
8% of consumers with > £1000 in household savings

In terms of number of transactions, if you divide the £3 billion revnue per year by total number of accounts then by the previous average £28 charge, how many transactions per account per year is this?

How does this compare to the total of all transactions performed by the banks?

I believe you'll find that these charges are levied on a disproportionately small number of transactions compared to the revenue they generate.

The document linked above makes for sober reading - if you choose to read it, hopefully you'll understand why this is an issue championed by so many on these forums.

thainstone

I was shocked at the Courts decision about charges.
I find it funny how the week before the court case Halifax dropped their charges right down from £35.00 to £15.00 each item.
If the banks thought the charges were fair why did they do this(obviously they think they are unfair also).
And why is it that if the banks had lost the case they would have been allowed to appeal to the European Court even after 2 rejections and an appeal to the Supreme Court,yet reclaimers have been stopped in their tracks and told they can't appeal the decision.
I feel that this is all because they are scared to drop the banks in it when they are struggling at the moment and still being bailed out(by us.......the tax payer).
Maybe the banks should have to bail the taxpayers out ( role reversal).
I think we should be allowed to go back to the old system of getting wages in a brown envelope every week then we can decide if we want to use the bank or not (wonder what they would do then).
An all of a sudden the MP's have gone very quiet on the subject..........typical.:rotfl: