Current Account Charges - Why I have no sympathy

Tim_L

Tootsie, how do you know my posts are misinformed if you don't read them?

Can you maybe give me an example of something specific I have wrong, so I have something to work with?

Service fees: this is clearly an attempt at obfustication. To justify this, the bank would have to show what was involved in the manual review and explain why it cost £25 with perhaps 5 being required within a short period of time. I would guess that the courts would rule that this was simply a penalty charge if they were ever allowed to.

Incidentally, the fact that this change is even being suggested is pretty clear evidence the banks know that their penalty charges are unlawful.

dchurch24

CopperPlate wrote:

People are not reclaiming their money - banks are simply capitulating and paying out - that said, a freeze has been made I read the other day, as a test case is currently going through court on this very point so it might very well turn out a result soon.

The test case has been paid out by Lloyds yet again. They, IMO, have known from the start that they wouldn't allow it to go as far as court, especially not a Mercantile court where a precedent could be set.

So, once again, the banks have wasted tax payers money, in order to save themselves a few quid (although in this case, they paid up - like most other times). It costs the banks very little to use this tactic to scare of, maybe 1/3 of people who have taken it this far. The tax payer loses, the customer loses. The only winner is the bank - who can go on charging what the hell they like until they are bought to order.

The 'stayed' cases, are no longer stayed. They have been paid up as well.


Incidently, someone mentioned that the banks have dropped their charges - they haven't. One or two credit card companies have dropped their default charges to 12 quid. Oddly, the exact same amount that the OFT said if a charge was over, they would take legal action. It just seems odd to me that they happen to find that it actually costs them (in the event of a breach) the exact same amount that they were threatened with. Hmmmm.

Surely, if they thought 20-30 quid was lawful, they would have carried on charging it in the safe knowledge that a judge would also find it fair and reasonable, no?

Courts have seen the changing of wording in contracts of penalties so many times that they actually have a term for it now: 'Cloaking a penalty' is an officially recognised legal term that is used when a contract wording is changed to disguise a penalty. A judge isn't going to fall for a bank suddenly saying "it's for a service that we provide", when clearly it's a penalty or a deterrent from bouncing a Direct Debit etc...

westernpromise

YorkshireBoy wrote:

Now, bearing in mind that this is clearly a 'service fee', because a bank employee(s) would manually review your banking arrangements/account management, would you agree that they could 'legally/lawfully' charge this service fee without fear of being taken to court and asked to explain how they came by the amount of the fee. After all, challenging this would be like challenging Ford on the retail price of their Ford Focus (because you know it didn't cost them £12K to build it) and wanting to know the gross/net margins they were making - wouldn't it?

No, it wouldn't. I think you've missed the point here, with respect. A bank cannot claim its fines are, in fact, some sort of bog-standard service contract, for the simple reason that in this country, it isn't banks that get to decide what is actually going on inside a contract, it's the courts. And if the courts decide that something is in substance a fine, that's what it is. What the bank wants to call it is neither here nor there.

The banks' problems stem from this fact - in this country the courts decide if your fees are actually fines or not, and if they are, you're !!!!!! out of luck trying to enforce them because commercial organisations aren't allowed to fine their customers. They are completely entitled to recover whatever their breach has cost, but they have to come up with proof of that cost.

This is where your attempt at fiddling a £25 fine past the courts as a "service fee" fails. First the bank would have to prove any "service" actually happened. Then it'd have to prove each one cost it £25. Let's see - bank clerks make, what, £20k a year? So at £25 a pop, that's 800 reviews a year. 16 a week. Two a day.

So to enforce its £25 "service fee", the bank would have to prove that it really did reviews; that it employed people whose entire work output consisted of doing two reviews a day; that it really did take 4 hours of bank admin time to do them; and that 4 hours each was a reasonable length of time to spend.

Do you reckon that would work in court then? I have just reclaimed £750 of charges - one year's worth - from NatWest for my other half. On the above numbers, if Natwest wanted to dress those up as service fees, it would have to prove that it had a guy on the payroll who had spent three whole working weeks reviewing my girlfriend's overdraft infractions last year!

westernpromise

alexjohnson wrote:

And that's why: the courts have no interest in getting involved in this kind of business and rarely determine on economic matters between parties.

Nope, not true at all; I work for an economic consultancy which makes 70% of its revenues from advising courts on exactly such matters. I have 2 cases going at the moment; in one of them I'm advising a court on whether the behaviour of a contract party was typical of a principal in its industry or typical of that of an agent. In the other, I am advising on the economic impact - and hence, fairness from a competition perspective - of a proposed change in storage regulations.

Courts aren't expert in anything except the law. They therefore call on expert witnesses to help them decide how to apply it in specific cases.

If a customer takes a bank to court and maintains that a "service charge" looks like, feels like, and has the effects of a fine, and thus is a fine, the bank has to show that it's not, or risk losing the judgement. No court is just going to assume that because one party says it's not a fine, it isn't, and that there is therefore no remedy to be had. We aren't India quite yet.

What makes the bank case unusual is that the bank has access to your money and can help itself. This is not the usual way round, in that normally, if you breach a contract, the other party would have to sue you for its loss. In this case, the bank has already taken the money and given no justification beyond its T & Cs so you have to sue them.

It is very instructive to note how ready we are to tolerate this nonsense though. Shops quite often seem to get away with displaying signs saying "no refunds" even though these have no force; and with claiming that they needn't repair a defective 366-day-old DVD player because it's out of warranty.

I wonder what would happen if banks introduced a clause saying that they'd levy a charge of £25 on everyone whose account balance ended in an odd number?

There's no more justification for that than for charging £25 for going overdrawn, but presumably, there would be people who'd agree that that was fine because it was in the T & Cs?

YorkshireBoy

westernpromise wrote:

This is where your attempt at fiddling a £25 fine past the courts as a "service fee" fails. First the bank would have to prove any "service" actually happened. Then it'd have to prove each one cost it £25. Let's see - bank clerks make, what, £20k a year? So at £25 a pop, that's 800 reviews a year. 16 a week. Two a day.

I'm no accountant, but...

Employee salary is £20,000
Employee 'on cost' is 28% of salary*
Cost of employing a clerk is £26,500 (before they actually do anything else)

Clerk works a 35 hour week, takes 33 days paid holiday a year, and sickness levels are running at 4%.
Clerks hourly cost is therefore £16.78/hour

Employer has to provide office space and equipment, welfare facilities, IT infrastructure, training, etc, etc. (no matter what task they are employed on).

Employer has to generate a gross profit per employee (no matter what task they are employed on).

Employer has to put someone else on this clerks normal duties (possibly temporary labour) if he/she spends an excessive amount of time on overdraft reviews.

It looks to me like a cost figure of over £25 per employee hour spent on overdraft reviews could very easily be 'proved' by a barrister defending a bank.

Like I said, I'm no accountant, but it looks like the OFT's £12 maximum (if also applied to current accounts) won't anywhere near cover the cost of the 'forced' reviews to HSBC's business. Maybe this is why Egg have recently set their default charges at £16? Maybe they even feel confident they can justify their costs simply (as I have done as a non-accountant) to a judge, if indeed a judge ever agreed to hear such a case.


* At my previous place of work, they used 23% but since then we've had the pensions deficit problems so I've estimated to include an additional 5% pension contribution by the employer.

So to enforce its £25 "service fee", the bank would have to prove that it really did reviews;

So the basis of the claim is that you don't believe the bank (HSBC in this case) when it says it *will* formally review accounts 'in trouble'. You're asking the judge to preside over a case where you are asking the bank to divulge it's core operational costs in open court to prove that it isn't lying.

that it employed people whose entire work output consisted of doing two reviews a day; that it really did take 4 hours of bank admin time to do them; and that 4 hours each was a reasonable length of time to spend.

No, the barrister would simply present a management report that said (better than I have done above) what it actually cost them to employ staff. The barrister would also, I suspect, labour the opportunity cost of carrying out reviews. Unless the bank set on more staff, something else would suffer - wouldn't it? After all, aren't there 44,000 members of the consumeractiongroup? How many 'banks' are there...20?

MPH80

Good post YB ... but ...

Salary for the clerk is nowhere near £20k. I had a house mate working for Natwest as a small business advisor. Before commission - he got £13k. That was 4 years ago though.

M.

YorkshireBoy

MPH80 wrote:

Good post YB ... but ...

Salary for the clerk is nowhere near £20k. I had a house mate working for Natwest as a small business advisor. Before commission - he got £13k. That was 4 years ago though.

M.

I haven't a clue what this grade of bank employee would earn*, so decided to use westernpromise's figure, but the rest of my 'reasoning' is sound - isn't it?

I only have (a basic) knowledge of management accounts in a manufacturing environment (having been on the receiving end of many a thrashing by them ), but I also know that our accountants can make their figures say anything they want. If an accountant can 'convince' a Production Director, then I'm sure an FD/barrister combo could convince a judge.

The idea of 'expert witnesses' is interesting. Where/how would the claimant locate, and finances the services of, such a witness I wonder?


* £13K four years ago would be around £14.6K now, meaning my 'rough' employee cost of salary, NI, and pension alone would be around £12/hour. The final figure, of course, would be much higher than this for the reasons I gave in my earlier post.

inmypocketnottheirs

YorkshireBoy wrote:

I'm no accountant, but...

Employee salary is £20,000
Employee 'on cost' is 28% of salary*
Cost of employing a clerk is £26,500 (before they actually do anything else)

Clerk works a 35 hour week, takes 33 days paid holiday a year, and sickness levels are running at 4%.
Clerks hourly cost is therefore £16.78/hour

Employer has to provide office space and equipment, welfare facilities, IT infrastructure, training, etc, etc. (no matter what task they are employed on).

Employer has to generate a gross profit per employee (no matter what task they are employed on).

Employer has to put someone else on this clerks normal duties (possibly temporary labour) if he/she spends an excessive amount of time on overdraft reviews.

It looks to me like a cost figure of over £25 per employee hour spent on overdraft reviews could very easily be 'proved' by a barrister defending a bank.

Your comments could be deemed fair and resonable if there is manual intervention and a member of staff goes throught the accounts and makes entries etc etc.

But by and large these puntive fines are imposed without any such intervention. The whole of the UK banking system is totally computerised, cheques never leave the bank that they are paid in at. The transaction process is totally automated, the letter generated notifying you of your charges is fully computerised, with a scanned signature, electronically folded and stuffed in to a prepaid envelope and sorted electronically by post code.

There is no justification for the level of bank charges in these regards, it is simply greed and profiteering, hitting more often than not the financially marginalised.

MPH80

But IMPNT - the ENTIRE point of YB's post was the HSBC have made the point they WILL do a manual review of your account at a cost of ...

So they are predefining it - and it looks easily justifiable!

inmypocketnottheirs

So for example 3 items come in on the same day, attracting a charge of say £30 each, the bank is going to perform 3 reviews?

I don't think so!!!!