Bank Charges Opt Out procedure - how should it work?

edited 4 May 2010 at 6:30PM in Reclaim Bank & Credit Card Charges
54 replies 9.2K views
Former_MSE_WendyFormer_MSE_Wendy
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wtd_icon.gif What's this all about?
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Following the OFT’s decision in Dec 2009 not to pursue the bank charges test case, earlier this year it released a report (sadly disappointing) into how it expects banks to improve unarranged overdrafts; one measure being to encourage banks to allow consumers to opt-out of charges. (See the MSE News story OFT delivers 'flaccid' report).

The Lending Standards Board (LSB), previously the Banking Code Standards Board, is putting together guidance by the end of the year on how the opt out of charges should work and what guidance to give to the banks.

We want to pass on your view to the LSB so please help by answering the few questions below.

wtd_icon.gif What the board would like to know
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1. How important is it to be able to opt-out of unarranged overdrafts on your account? Would you be prepared to switch accounts or providers to obtain the ability to opt-out?

2. What do you see as the benefits that an opt-out would bring?

3. What factors are you likely to take into account in deciding whether to choose to opt-out?

4. What risks do you think there are to opting out and how important are they? For example important payments will declined and there could still be an 'unpaid item' fee.

5. What are the essential elements that the proposed standards should cover?
wtd_icon.gif What the guidance won’t cover
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While it’s fine to write your thoughts on bank charges in general below these are unlikely to be the kind of ideas that will make it into the final guidance so please try to stay away from the level of charges eg £5 is a fair amount or 10% is a fair overdraft interest rate.

Thanks :)

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Replies

  • edited 5 May 2010 at 1:34AM
    moneysavingkittenmoneysavingkitten Forumite
    576 Posts
    edited 5 May 2010 at 1:34AM
    Best news I have heard in ages! If you had been able to do this a few years ago this could have saved me a world of pain. Off the top of my head (thankfully is has been a while since I incurred any bank charges *phew*) to answer your question:

    1. How important is it to be able to opt-out of unarranged overdrafts on your account? Would you be prepared to switch accounts or providers to obtain the ability to opt-out?

    I think it is vitally important that customers have the option to opt out, I would switch banks for this option definitely. But I think it is highly cheeky that customer will be asked to opt out. I think that customer should have to 'opt-in' for bank charges, as I think most people would prefer it this way round. I think if they opted everyone out to begin with, people would have more trust that they are trying to help and not sneak something past them. I have experience of this when I design websites. If I think a customer will not want to sign up to something, say a mailing list, I will leave the option unchecked on the website, and allow customer to opt in, rather than opt out. I do this because then if a customer complains about being including in a mailing list, they actually opted in rather being automatically included, so they should have less to complain about because it is *honest*. I think honesty is what customers always want.

    2. What do you see as the benefits that an opt-out would bring?

    Greatly reduced bank charges for all. No more unexpected or unwanted over spending, especially on bank holidays, when banks do not show your correct bank balance for a number of days. More choice for customers, hopefully a greater level of customer awareness about bank charges. I think it would be fairer for young people, who find out about the banking system work to begin with usually by using than reading about it. It sounds a little like how the VISA electron system was claimed to work but in reality doesn't.

    3. What factors are you likely to take into account in deciding whether to choose to opt-out?

    Whether or not it affects other account features (ie, statements, overdrafts), other financial products and services you can buy. Will it have any effect on credit rating if you do opt-out? Whether or not it is a true opt-out, or whether the system still has holes. (What happens if you take out money from a cashpoint that has gone offline, when you spend money abroad, from a direct debit or contract, will this mean that recurring card authority (RCA) will be able to be cancelled now, or will it just not be paid?

    4. What risks do you think there are to opting out and how important are they? For example important payments will declined and there could still be an 'unpaid item' fee.

    It would be nice if there was some kind of warning if a recipient was not going to get paid. In America the online banking system is instant I believe, even transferring monies between different brands of bank. I have never understood why our banks have not caught up this way. I feels like it is a dirty trick to make more money. If they updated in real time, I'm sure it would be no problem to send an SMS to customers to tell them that a payment has been declined. Then if it is important, they could find an alternative way to make the payment.

    If there is still an unpaid item fee, I don't think this system would be much help at all. It would be less painful than having to pay back the unplanned over draft, but you still have the unpaid fee and your bill didn't get paid. If there is going to still be an unpaid fee, then maybe this should be limited by a certain number a week/month? As for people with little money an unpaid fee of £30 - £70 is still an amount of money that can have a serious effect on ones financial situation.

    I think if you are telling people that it is a 'Bank Charge Opt-Out', as I read in your newsletter, it is a very misleading name to call it if there will still be unpaid fees. People will expect what it says in the name. No bank charges, as I thought it meant when I started writing this post. Again, I think people would be a lot happier if banks completely honest, there is no trust there at the moment.

    Again I don't understand what would happen here with RCA, unless the rules around this were changed.

    5. What are the essential elements that the proposed standards should cover?

    I believe the proposed standards should include:
    • opt out by default, or minimum opt out for people's account who are under 18.
    • explanation of what will happen on bank holidays, when correct balances are not shown for days
    • explanation of what will happen to RCA
    • clear rules on unpaid fees
    • full details of any charge that can possibly be made
    • examples of the way charges can be made in each situation, so a customer understands how to avoid them if they want to
    • what will happen if a charge is made unfairly
    Mmm, that's all I can think of for now. I hope this is useful.
    So so SO tired of being ripped off, and mislead
    Hope sharing saves some pain.
  • Brilliant post by moneysavingkitten. That says everything I would want to as well.

    Thanks,
    pippitypip
    I know I'm in my own little world, but it's ok - they know me here! :D
  • mikeotemikeote Forumite
    3 Posts
    I Agree with Moneysavingkitten !
  • taxingtaxing Forumite
    155 Posts
    I particularly like the point on 'Real Time Banking' - would make life easier for everyone, and in a digital age (as you say) why can't it all be 'instant'.
  • Excellent post by moneysavingkitten who says it all really.

    If I try to withdraw money at a cashpoint, and have hit my overdraft limit then no withdrawal, no charges. - "Insufficient Funds". This is fair.

    Standing orders, direct debits, debit card payments should be exactly the same. No funds, no payment. The account holder looks silly at the checkout, or has to explain to vodafone why their bill wasn't paid, but doesn't go further in debt!

    To repeat some of the points above:
    Ideally an account holder should have to opt in to an "unarranged overdraft" scheme (with charges), rather than out of it.
    Ideally an account holder would be advised (no charge) if an item was returned, but I'd rather not be told than pay £35 for the privilege of a letter.
    Ideally all payments would happen in real time for this to work (currently debit card transactions are delayed by a day or two which can cause problems*).

    But these "ideally"s are negotiable.

    The important thing is for account holders to have the option of saying:

    "If I have no funds available, don't make payments from my account, and don't charge me."

    That way I can guarantee I won't ever go over my limit (surely the bank should want that?), and any other details are just that - details.

    *Customer has £20 in bank. Customer buys £15 of goods with debit card (money doesn't leave account). Customer withdraws £20. Debit transaction hits account. Customer goes over limit by £15. Problem.
  • edited 5 May 2010 at 12:44PM
    PlasticMan_2PlasticMan_2 Forumite
    53 Posts
    edited 5 May 2010 at 12:44PM
    To answer the questions again:

    1. How important is it to be able to opt-out of unarranged overdrafts on your account? Would you be prepared to switch accounts or providers to obtain the ability to opt-out?

    It's incredibly important and the only fair way. Yes absolutely I'd switch account.



    2. What do you see as the benefits that an opt-out would bring?

    People could manage their finances for the first time in the knowledge they wouldn't be able to go over their limit.


    3. What factors are you likely to take into account in deciding whether to choose to opt-out?

    Do I want to be charged exorbitantly for unintended borrowing? (no)


    4. What risks do you think there are to opting out and how important are they? For example important payments will declined and there could still be an 'unpaid item' fee.

    - risks - None.
    - missing payments - If I miss payments because I have no money that's my fault and I will deal with it. It is up to me to ensure I have the money I need in my account and to have a "buffer zone" included in my arranged overdraft limit for emergencies.
    - 'unpaid item' fee - Whoa, hold on a minute! I opt out of charges and then get charged?! Now you're being silly. No payment, no charge. Simples. It costs the bank nothing to decline a payment.



    5. What are the essential elements that the proposed standards should cover?

    That the customer has the option to have payments declined with no charges when they do not have funds to cover that payment. It's as simple as that.
  • KDH001KDH001 Forumite
    9 Posts
    All valid points mentionwd above, except the fact that these accounts already exist.

    Most benefit recipients have these accounts opened directly by the benefit office for payment of benefits directly into their accounts, (prevents fraudulent claims for lost giros, and is cheapper). They are available to everyone.

    It shopuld be emphasised, that although you will not acrue bank charges, those same people will get hit with even higher late payment fees from the companies that were being paid by debits or SO's. It just means no cash for you from the hole in the wall.

    No doubt the MoneySavings Expert teams will be on hand to try to fix this for you all as their next crusade, instead of teaching you how to handle finances properly in the first place and imprisoning those who persistently offend for theft.
  • yep, as above!!!! i cant put it any better than all said above xxx
  • KDH001 wrote: »
    ...these accounts already exist.
    You mean the Post Office Card Account?
    Which I can't get my wages paid into? And where I can only take money out using post office counters? Thanks. That's helpful.

    And I'm not sure why you're suggesting that the MSE team should be locking up criminals. Perhaps you're on the wrong thread, or the wrong website?
  • GM43GM43 Forumite
    102 Posts
    I've read through all the above posts and I think they are great, I completely agree with them.

    I think the most important points are that there shouldn't be any charges for turning down the payment due to insufficent funds (I remember this happening about 20 years ago with a mortgage payment - I'd messed up and my mortgage didn't get paid and then the bank charged me for the privilage of not paying it!). Also that the banking should be in real time - I often use my debit card and while my on-line banking tends to show that something is due out it doesn't show how much and what it was for. I have discovered that if I ring their call centre they can tell me what transactions are pending and when they will clear. If they have that info why can't they just let it show in my account?
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