MSE News: CONFIRMED - OFT gives up bank charges battle

natweststaffmember

The_White_Horse wrote: »

i went to cinema once, and they charged 4.00 for a large pop corn. However, that corn cost them less than 2p. I think we should have a word with the OFT about this. A profit making company making a profit is just completely unacceptable. I mean, i am just saying it should be FAIR and the popcorn should be charged at 4p not 4 pounds.
But you can OPT OUT by not purchasing it as part of the cinema ticket. Furthermore, you can bring your own popcorn from another provider sneakily under your coat .
also, if i have 20 quid in my account and I need to pay for something that costs 40 the bank should just give me 20 quid. no questions asked. i think maybe they should charge me a few pence for the privilege, alternatively, i could just not spend more than is in my account.

The bank will always consider it but depending on how you pay will depend on how they decide to consider it. If you try to do so at the ATM it will decline and no charge is made. If it is done on your card then it might be authorised by the bank at their discretion. If you pay by cheque it might be authorised if you have your card details on the back or not and each time the consideration is weighted differently.

natweststaffmember

alexjohnson wrote: »

I think the OFT report - and some of the submissions in court - were too narrow and invite the conclusion that there is a cross-subsidy. They say,
"C.6 We estimate that total revenue derived directly from PCAs was £8.3 billion in 2006. This excludes any revenue generated from products cross-sold with PCAs such as insurance and mortgages. It includes revenues from packaged PCAs."
That is some caveat!
Alex, what does PCA mean?? Personal Current Account ie not a mortgage or an insurance product.
I don't buy it. Current accounts are a subsidised product, that's for sure - but that is because banks are really selling two products - savings and loans. The loans can be sub-divided into short-term loans (overdrafts) and longer-term loans like mortgages and term loans. The current account is the mechanism whereby you can become a customer for one of these products, and subsidises that "sales effort." (Whether that works is another matter - evidence increasingly suggests it doesn't work particularly well.) So, the bank will try and make money from you any way it can, and if it can't make money from your account even then depositors are "subsidising" the wholesale activities of the bank, albeit expensively. To take one slice of the business and look at it as if it were a self-contained whole is arbitrary and articificial.
I'm not talking about loans or mortgages since banks make a profit from loans on the interest, ie you borrow £5k and pay back more, the same with a mortgage product. It is not the same as a personal current account. I do understand the cross selling argument but that doesn't mean everyone will get insurance or mortgages off the back of a current account.
I can see how you would look at the cashflows differently, of course. But why the cross-subsidy model makes so little sense to me is that it makes little economic sense. If you have a class of people - people in credit, say - who cost you money, and another class - people with overdrafts, say - who always make you money it's not obvious why you would build a business model where you are locking in losses on a large segment of your customer base. In other words, why not just focus on the people with overdrafts, and encourage the other people to leave? (How? Like credit cards have tried - monthly fees, which are waived if you are paying charges.) I appreciate it's not quite so simple as this as you need a dposit base to be able to lend the money in the first place, but the idea that a bank would set up a model - deliberately - where one lot of its customers were subsidising the other seems bizarre. I bank with a well-known telephone-only bank and I doubt they make any money from me. This is a pity as I like them and would do more things with them, everything being equal, and the account I have with them partly helps their banking conglomerate parent raise capital cheaply, but it mostly gives them frequent opportunities to try and sell me things. I just can't get my head around the idea that I am somehow a balancing item for some other class of people paying charges. It just doesn't work, does it?
The current free if in credit model is one of the most profitable in the whole of Europe to be honest. I have to say looking at the figures I kinda thought that is quite an odd figure since we had always believed that bank charges cross subsidised those in credit when the truth is that it is not exactly the right picture of what was thought of earlier. When interest rates go up the bank will make more money on credit balances but their margins have been much lower. In fact, RBS group lowered charges so their margins are a lot lower.
What actually happens is that those people pay charges in order to be profitable in and of themselves. You may wish to argue - as the OFT is now doing, belatedly - that the level of those charges is too high. You could have said it suggested colusion. Or, you could say that banks are just charging what the market will bear, because these charges are almost completely optional, whether by more careful account management, or by switching banks.
To be honest, I would like to argue the US model of overdraft services as given by Regulation E over there, ie you opt into "overdraft services" or payments are declined. Personal opinion which I favour or even a bit of combination of perhaps cancelling a DD on the day it goes out for a small fee rather than the bank deciding at its discretion which payment to allow through and which ones to not allow through.
"Free banking" is only free because charges get levied, of course. And as a non-payer of those charges this suits me very well. But I pay my banks plenty of money on fees and interest through the products I use. Those products happen not to be short-term on-demand loans, and I don't see why I should incur those fees on top of the fees and interest I already pay. That to me is the unacceptable subsidy.

The last bit does not follow what the PCA study has found out. The model which the banks argued through the courts is "Free if in credit" yet it is cross subsidisation within the PCA framework of 1005c. I don't really have an issue with banking for a price that everyone pays if like sky or cable you can pick and choose the services you want for a price per month.

Premier_2

natweststaffmember wrote: »

you are actually the one being taken over the bench to be honest since the thrifty are the ones being shafted for their banking.
My source is OFT 1005
http://www.oft.gov.uk/shared_oft/reports/financial_products/oft1005c.pdf
Page 7 for you.

Well if paying nothing for current account banking services is being shafted, bring it on

I'd rather be shafted than pay the thousands of pounds fees like some people here.

But I know you've posted previously saying you've never paid banking charges either. Presumably you actually have a bank account?

natweststaffmember

Premier wrote: »

Well if paying nothing for current account banking services is being shafted, bring it on

I'd rather be shafted than pay the thousands of pounds fees like some people here.

But I know you've posted previously saying you've never paid banking charges either. Presumably you actually have a bank account?

I just think people come onto to here to say I don't ever get charged so I am so great when in fact, they are clearly dimwitted enough not to see the stapler entering the posterior when others are seeing it and where it is going

I prefer to help people if they have had huge fees charged than telling them that they should read the terms and conditions etc.,etc,. I think they already have been hit around the head enough, which leaves the job of us as to advise what they can do going forwards, whether that be contact their various providers to seek help, whether that means advising whether they are claiming the right benefits that they are able to with their circumstances, whether that means asking the bank to look at a refund of charges due to a period of financial hardship that they are going through.
If the bank required a financial aptitude test to open an account then I am not entirely sure we would not be still being paid cash. Furthermore, from working from within, and dare I say this, dealing with those supposedly there to help customers in severe difficulties with their accounts, I know how very much intransigent those people are. It is a pity that we have a reclaiming forum, and it is a pity we have people ready to ride roughshod over others regardless of who they are. Yes, I know of those who probably need a good slap to be honest, but to apply it to everyone is simply ridiculous. Just my opinion.

Yes I have bank account credit cards and loan so the bank are making money from me, lol.

Alpine_Star

dunstonh wrote: »

Good decision. I know that won't be fashionable with those on this forum but there has to be some common sense in that you cant borrow money that isnt yours for free.

It would be impossible to borrow money that is yours.

Nobody is saying they want to borrow money for free.

Bank charges are not incurred for borrowing money. They are for the consideration of whether to lend money or not and the cost of any borrowing is by way of interest charged.

As a 'financial advisor' I am a little surprised that you don't know this.

orc_2

rosemarie.nugent wrote: »

I have been banking for over 40 years and strongly feel that your campaign is a little short sighted. This country is in this mess as consumer credit has gone mad; If you arrange an overdraft, then fine, its arrange, but if you go overdrawn without consent you should pay heavily for it - that way it will stop you over-spending in future. - and assist those of us that have been thrifty to keep the banking costs low.

Sorry if this is not PC!

Thanks for taking the time to register on this site, find this forum and then impart your wisdom to the unclean.

Consumer credit- you don't think that financial institutions have any blame attached to them? Thats quite incredible.

Have a merry Christmas!

discoass

alexjohnson wrote: »

I've said before I would have written letters and whatnot, sure I would. But that's because I pay attention to these matters. I would not have claimed to be doing it on behalf of low-income workers, I can promise you that.

writing letters is fine if u know about it,b4 this fight began u would be lucky if u found out about the charges until they went in,strangely things have improved a little



Well, clearly that opinion has not prevailed, despite your use of capital letters.

I was talking in past tense


And a full tank of petrol would cost about the same. What is your point? If you want petrol, you buy it, and it has a cost. If you want an overdraft without arranging one in advance, some banks have charged that much. I've suggested before that late on a Friday night withdrawing cash to pay for a cab might be a very good reason you want that money. If you don't, my advice would be to arrange your finances appropriately. The fact that you don't strongly suggests to me that given the choice between setting aside an hour a week (or whatever) to sort these things out, or doing something more fun, you choose "more fun." I don't judge that choice - I pay for my shirts to get ironed as I can't be bothered to do that. But, it is a choice.

I can travel 400 miles on a tank of fuel there is a physical product unlike a bank charge .You say" IF I WANT AN OVERDRAFT ",thats the problem i dont ,dont pay it let me deal with it and dont charge me for the privilage of saying yr not gonna pay it
And as it happens it has taught me a good lesson ,and as it happens i am a very prudent budgeter ,but remember alot of these charges were applied b4 the wonderful thing of internet banking when a bank statement from a cashpoint was a week out of date

discoass

alexjohnson wrote: »

It's also set up so if your bank is screwing you, you can move your business to one that doesn't. Martin writes about it just about every single week.

To a bank that applies the same charge ..same product different logo

Premier_2

Darth_Thundercloud wrote: »

Clueless

NFT

Darth_Thundercloud wrote: »

Clueless

NFT

Darth_Thundercloud wrote: »

Clueless

NFT

Hi, Darth Thundercloud and welcome to MSE.

It's the quality and thought that goes into posts of new members that we all enjoy reading :rolleyes:

NFG

orc_2

natweststaffmember wrote: »

http://www.oft.gov.uk/shared_oft/reports/financial_products/oft1005c.pdf
The above is how PCA's are financed, PAGE 7 for those who are interested.

Yes.


http://oft.gov.uk/shared_oft/personal-current-accounts/oft1154
The above is about why the OFT are not pursuing it.

Everyone should read.

Any chance we can discuss that matter rather than whether agreeing to have a bank account means that you can be taken over the desk with a stapler shoved up your posterior?:T

Everyone should cover their eyes and stick cotton wool in their ears.

Nattie,


Could I ask if that is an electric stapler by chance? You could set something in motion with that. It would make people sit up and take notice...........or perhaps not.

:rotfl::rotfl: