The deterran argument....

davidgmmafan

Does it really stack up?

Some argue that not only should there be charges but that they should be HIGHER than they were, but I simply cannot accept this. If the charges are intended as a deterrant, which I believe is nearer the truth than the fees for service argument the banks employed successfully (but still wrong!!!), then they clearly don't serve theier purpose.

If they were an effective deterrent then the fees would not be worth £2.6 billion a year, the money generated would be declining year on year until it reached zero or some negligible account.

I would also add at this point if the intention is to deter people from exceeding thier limit, or even having returned items (which involves minimal work from the bank) then any amount is acceptable for a fee.

Why stop at £30? Why not £50 or a million? If the principle is accepted then the amount is only a difference of degree.

I don't know if this is the right place to post this but I'm quite new here and would happily have the thread moved.

I'd really REALLY like to see the BBA or some other representaitve of the banks answer the real questions relating to thier position... Hey a guy can hope.

davidgmmafan

Shame I can' edit the title. For the avoidance of doubt I believe the origin of charges had an element of deterrant or punishment, but now the charges are purely to maximize profit.

I have no problem with this in the sense that any business needs to make a profit, however I feel they should invoice seperately for these charges as other companies do for thier services.

Smasher

davidgmmafan wrote: »

Shame I can' edit the title. For the avoidance of doubt I believe the origin of charges had an element of deterrant or punishment, but now the charges are purely to maximize profit.

I'd say they were designed to maximise profit from the outset. The recent change in T&Cs pretty much confirm that..

dunstonh

Smasher wrote: »

I'd say they were designed to maximise profit from the outset. The recent change in T&Cs pretty much confirm that..

The recent changes can seen to be fairer and easier to understand but many people are financially worse off under the new style charges than the old one.

I recall my banking days when a quarter of the branch staff were involved in dealing with the bad accounts and unauthorised/bounced items. The charges were easier to justify back then because of the high levels of staff time involved. Computerisation has made that justification much harder. However, the computers did need to be installed, updated and continuously programmed and maintained. So, whilst the actual transaction time in dealing with bad accounts has gone down, there has been a significant expenditure to get it to that stage.

Plus, there is a bit of cross subsidisation to pay for accounts that have been written off with.

Charges do need to exist and people do need a bit of a deterrent to make sure they control their own finances (and the new style seems to fit that more than the old) but they were a bit higher than they ought to be. Not so much for serial offenders through stupidity, laziness or abuse but for the occasional transaction that took someone a few pounds over and was hit for often 20x as much in charges.

Gorgeous_George

Tip: Click edit and then Go advanced to edit the title (or click on the title in Forum view).

The charges imposed by banks were unfair. They are not allowed to penalise customers but can use charges as part of an overall package of fees.

The main problem is that once someone gets charged, they are more likely to be charged again (due to the loss of the original charges). The problem spirals out of control and suddenly the account is unrecoverable. For example, go overdrawn by £50 and incur fees of £35 = now overdrawn by £85 (well, not now but sometime next month when the bank decides to take the charge. Now they've got you in their grip and play you like a puppet. You could end up paying money in to your account and staying in conrtrol of your finances but that original error can cost you £1,000s.

If I could change one thing it would be this. The bank shoud send the debtor an invoice. Then you will conscienciously pay the bill and know exactly where you are making it easier to control your finances.

GG

natweststaffmember

dunstonh wrote: »

The recent changes can seen to be fairer and easier to understand but many people are financially worse off under the new style charges than the old one.

I recall my banking days when a quarter of the branch staff were involved in dealing with the bad accounts and unauthorised/bounced items. The charges were easier to justify back then because of the high levels of staff time involved. Computerisation has made that justification much harder. However, the computers did need to be installed, updated and continuously programmed and maintained. So, whilst the actual transaction time in dealing with bad accounts has gone down, there has been a significant expenditure to get it to that stage.
Most of them are one program that simply needs an input within them. I have seen the manual RBS Group use on their computer systems so believe me that whilst they may have to update their mainframe with new things such as products and services the program related to charges has hardly changed. I would say Barclays are probably the only ones that you could say was a real change in the actual charging program itself due to the changes in their charging structures,
Plus, there is a bit of cross subsidisation to pay for accounts that have been written off with.

Charges do need to exist and people do need a bit of a deterrent to make sure they control their own finances (and the new style seems to fit that more than the old) but they were a bit higher than they ought to be. Not so much for serial offenders through stupidity, laziness or abuse but for the occasional transaction that took someone a few pounds over and was hit for often 20x as much in charges.

I agree with you re charges need to exist regardless of anything and in spite of the argument of deterrent which I don't really buy into since the bank argued that the charges were for consideration to pay/grant an excess etc,etc,

davidgmmafan

Gorgeous_George wrote: »

Tip: Click edit and then Go advanced to edit the title (or click on the title in Forum view).

The charges imposed by banks were unfair. They are not allowed to penalise customers but can use charges as part of an overall package of fees.

The main problem is that once someone gets charged, they are more likely to be charged again (due to the loss of the original charges). The problem spirals out of control and suddenly the account is unrecoverable. For example, go overdrawn by £50 and incur fees of £35 = now overdrawn by £85 (well, not now but sometime next month when the bank decides to take the charge. Now they've got you in their grip and play you like a puppet. You could end up paying money in to your account and staying in conrtrol of your finances but that original error can cost you £1,000s.

If I could change one thing it would be this. The bank shoud send the debtor an invoice. Then you will conscienciously pay the bill and know exactly where you are making it easier to control your finances.

GG

We are in complete agreement, particularly on the last two paragraphs, as far as I know I was the first to propose a seperate invoice. I know there would be problems because banks would have to argue with customer about what the charge was for, exatly how this was a 'service' but that's kinda the point.

I DO feel it is extremely unfair that the banks appoint themselves creditor number one. For people on megre incomes who knows what else they don't pay to try to get on top of things. There must be some reason why every debt charity explains very clearly what priority debts are.

In this situation where a person makes a reasonable offer consistent with what they can afford in my experience the bank will reject it and continue to pile on the misery (also known and charges and interest) . Much more work (actually anything at all would be nice) needs to be done here, to prevent the bank abusing the relationship with its client, and to actuall do what thier literature claims and be sympathetic to people in hardship.

Sorry to keep going on about the same old things but I seen it with relatives and as a volunteer advisor at the CAB. Individual makes propose to bank, treating all creditors in the same catergory fairly with a pro rata payment. Bank rejects it. CAB or similar send same info on thier letterhead and it has a much better chance of it being accepted.

Nobody seems to buy the deterrant argument, so why do so many advocate it here and elsewhere?

housesitter

davidgmmafan wrote: »

Does it really stack up?

Why stop at £30? Why not £50 or a million? If the principle is accepted then the amount is only a difference of degree.

Punishment verses risk, verses reward.

For the sake of arguement; I know if I drive faster than the speed limit I take a risk of being fined for it. Say the fine is £60. For some that is a lot of money, for others it's pocket change.

It is a deterrant, but it utterly depends on whom you are asking and what their opinion is of the cost of taking the risk of going overdrawn.
Some people are hapy to pay the fine, some people are too daft to do anything about it, repeatedly.

Take speeding as an example again; some countries link the fine to income so it supposedly affects everyone equally. I think it was Finland who fined someone €100,000 for speding proportional to income.
Probably a more effective deterrant than £60.

I don't get why people have such a problem with these fees.
No one is forcing you to break the terms and have to pay them.
No one is forcing you to speed either.

People do both. The risk is worth the reward and the punishment is acceptible to them.

The solution to the fees is a hard stop limit on your bank account, but then the fines would come from elsewhere.
If you cannot manage your finances you need to cut back. There is no further problem.

natweststaffmember

housesitter wrote: »

Punishment verses risk, verses reward.

For the sake of arguement; I know if I drive faster than the speed limit I take a risk of being fined for it. Say the fine is £60. For some that is a lot of money, for others it's pocket change.

It is a deterrant, but it utterly depends on whom you are asking and what their opinion is of the cost of taking the risk of going overdrawn.
Some people are hapy to pay the fine, some people are too daft to do anything about it, repeatedly.

Take speeding as an example again; some countries link the fine to income so it supposedly affects everyone equally. I think it was Finland who fined someone €100,000 for speding proportional to income.
Probably a more effective deterrant than £60.

I don't get why people have such a problem with these fees.
No one is forcing you to break the terms and have to pay them. You need to be careful here with your wording because if there is a fee for breaking a term then it could be argued that it is a penalty in law(that argument was not correct and was therefore mostly defeated by the banks in court). The fees, as argued in court is for consideration and not for any breach of the terms and conditions.
No one is forcing you to speed either.

People do both. The risk is worth the reward and the punishment is acceptible to them.

The solution to the fees is a hard stop limit on your bank account, but then the fines would come from elsewhere.
If you cannot manage your finances you need to cut back. There is no further problem.

see above,,,,,but spotted you veering into the Penalties in Law argument and that is not in the equation anymore.

housesitter

I'm not interested in being an apologist for people who would prefer to wriggle out of their commitments rather than do the moral thing and own up to the mistakes they have made and deal with the situation that they got themselves into.

People getting away with things they done which are wrong on mere technicalities should actually be ashamed and we should not be celebrating their inability to take responsibility for their own actions.

You can go on about the legalese, it's not really that important.

Smasher

housesitter wrote: »

I'm not interested in being an apologist for people who would prefer to wriggle out of their commitments rather than do the moral thing and own up to the mistakes they have made and deal with the situation that they got themselves into.

People getting away with things they done which are wrong on mere technicalities should actually be ashamed and we should not be celebrating their inability to take responsibility for their own actions.

You can go on about the legalese, it's not really that important.

Excellent point, I couldn't agree more! That's why it is so disappointing that the OFT chose not to continue. But thank god there are still plenty of people working hard to bring them to book on more solid points of law.

As for owning up to their mistakes and dealing with the situation they got themselves (and us!) into, they simply won't. We and our kids will just have to suffer that now..