Bank Charges Opt Out procedure - how should it work?

tifo

if we all opt out, what will happen to the account 'fees' that the banks say they currently only charge when an item is returned unpaid, i.e. we agreed to pay a fee for retail banking but only when the bank has to return payments? i.e. no fee if 'in credit'.

natweststaffmember

moneysavingkitten wrote: »

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.
Many people would scoff at this idea but the US has passed regulation so that this will happen this year, ie that you have to opt into the system or all payments will be declined regardless of the amount.
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.
The obvious benefit for the consumer is that they are not "surprised"/ "angered" when they receive charges for a service that they opted into.
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?
Simple: Do I want the service or not as there are no other factors that I would think of.
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.(there should be anyway but many banks do not have the facility but will repay charges if the person is 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.

I would like to add that I think the card providers should be consulted since they offer the voucher not verified system, plus floor limits which I think should be abandoned and all transactions should be authorised regardless. This point was identified in the OFT report either December or their update. If this is not done in line with the above then the discussions are simply lip service again to consumers that "we are consulting the public).

Great post btw.

Widelats

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?

Personally, i don't have over drafts they wont let me.

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

If pay pal or some company like Virgin or BT charge me when they shouldn't, and then i get a returned bill of £20 from the bank for their errors, i think this would be good to stop that kind of racket going on.

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

I would choose to opt out of all direct debits being returned on my costs, if they make mistakes they should pay for it themselves.

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.

For me there is no risk of opting out, i recieve zero services from them like millions of other unemployed people who were forced into making bank accounts than keeping a Post Office account, as the Post Office closed down.

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

Not sure on this one.

Saetana

GM43 wrote: »

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?

We now have the type of account where we can't go overdrawn - however a refused payment would incur a £15 charge (it used to be £35 until the big stink over unfair charges!). I cannot see how any of this proposal would help us at all. Given the absurdly low cost of banks declining a payment (at most, a letter, envelope, stamp and 5 minutes of someone's time) I think a maximum unpaid item charge of £5 should be imposed on the banks.

I agree about the "real time" banking, my debit card payments are "ringfenced" on my account so I can no longer draw the money but still show as part of my total balance! I use online banking which has my balance and "available" balance and even that can get confusing when I've made a lot of payments. Why on earth is the full balance not instantly debited properly instead of the money merely (in the main) being ringfenced immediately at point of transaction? Direct debits go instantly from my account so why can't debit card payments when it is all done via computers?

I do think this system could be useful for some but, again, the spectre of unpaid item charges rears its ugly head. This proposal says nothing about that.

glossyhair

KDH001 wrote: »

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.

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.

Oh great!!!! Another "generaliser" and "people on benefits" basher . . just what we need on these forums! :mad::mad::mad:

MSE is a great place for education for those who know it exists and where to look. Sadly, after decades of being told "greed is good", "buy what you want on the never never" etc. there are many people who are less financially savvy.

Particularly as a newbie, if you don't have anything positive to say about Martin and MSE then what on earth are you doing on here? Go away and write to the Daily Mail instead; you'll find loads of people to agree with you there :eek::eek::eek:

Anyway . . . rant over and back to the topic please :money:

PlasticMan_2

Saetana wrote: »

...absurdly low cost of banks declining a payment (at most, a letter, envelope, stamp and 5 minutes of someone's time) I think a maximum unpaid item charge of £5 should be imposed on the banks.

The cost to the bank should be nothing. The process can be fully automated and I really don't need a letter. If I don't pay my phone bill, or my charitable standing order, then vodafone or the charity can get in touch about it. If the bank likes they can text me or email me, but only as long as there's no charge.

Unpaid item charges really are daylight robbery, and they are frequently the ones which then create further charges later on. I have no idea why they weren't considered independently during the OFT case. Forget maximums (like £5). There is no excuse at all.

moneysavingkitten

I thought about it a little bit more, and I suppose this is a good example of why I think people should have to opt-in.

Gamestation did an experiment to see whether or not it's customer read terms and conditions when they purchase something online. In the term and conditions, it said if the person did not opt-out, Gamestation would legally own their soul (obviously, I am sure they cannot legally own a soul but even so...).

Only 12% of Gamestation customers opted out of selling their souls for nothing. Which logically means 88% of people did not bother to read the terms and conditions of the sale.

Here is a link to the article:
http://idle.slashdot.org/story/10/04/15/1328210/Fine-Print-Says-Game-Store-Owns-Your-Soul

I realise that this is a different scenario and the bank would probably provide the information on paper. But really, do many more people read the tiny print they manage to shuffle to the least obvious places on their leaflets and letters? And even if they do, most people will occasionally miss the odd update in leaflet, letter or e-mail just because we all get so many and only have so much free time.

I think that if the statistic for reading banking terms and conditions is anything like online sales, then the banks already know that the proposed stopping of unplanned overdrafts will not help people very much.

Alpine_Star

In my view the case for opting in is overwhelming. But it's important to understand what insufficient funds charges are in law: they are for the service of 'consideration' at the point a bank is presented with a payment instruction where there are insufficient funds to meet it.

The default position is that the banks automatically impose the 'consideration service' because they 'deem' a payment instruction as an 'informal request' for an overdraft.

According to data supplied to the OFT from the banks, some 80% of current account holders don't present a payment instruction in those circumstances and so opting out simply wouldn't apply. Of the remaining 20% the vast majority of people (92%) would want to opt out anyway, according to a large poll conducted by MSE http://www.moneysavingexpert.com/poll/29-01-2008/bank-charges-poll-fine-v-payout

This leaves very nearly everyone to whom it would be of any relevance who would want to opt out. Clearly the most effective model to use would be for the few who genuinely want it, is to opt in, as opposed to the vast.majority having to opt out.

simon_g_4

PlasticMan wrote: »

The cost to the bank should be nothing. The process can be fully automated and I really don't need a letter. If I don't pay my phone bill, or my charitable standing order, then vodafone or the charity can get in touch about it. If the bank likes they can text me or email me, but only as long as there's no charge.

Unpaid item charges really are daylight robbery, and they are frequently the ones which then create further charges later on. I have no idea why they weren't considered independently during the OFT case. Forget maximums (like £5). There is no excuse at all.

Yep, completely agree. Banks should not be able to charge anything for saying "declined - insufficient funds". If it was OK for them to charge a fiver for declining a payment, then it would be OK for them to charge me if I went to a cash point and tried to draw out £30 when my balance was £28 for example.

Also, I have a prepaid Mastercard account which does update my balance in realtime and refuses payments without charge if funds are insufficient. Unfortunately I don't think these accounts support direct debits or standing orders so not really viable as a current account alternative. Current accounts updating in realtime is an absolute must!

PlasticMan_2

Alpine_Star wrote: »

[the charges...] are for the service of 'consideration'

Certainly that's the line we get fed but everyone knows it's nonsense for all the following reasons:
- Banks don't charge for overdraft applications. When was the last time someone called to say "please can I extend my overdraft" and was told "Well to start with I've charged you £35 just for asking...".
- Under these circumstances the important thing would be consistency; either make the payments (up to a prescribed limit) or don't. It's of no use to the customer to know the payment will be considered, and *might be* made.
- As you point out (thanks for the link btw), the overwhelming majority would, like me, prefer the payment to not be made and no charge to be made.

So why do all the banks persist with a "service" nobody wants? It's obvious that the banks only continue this "consideration" farce because of the vast sums of money it makes them from customers who are poor, disorganised, or both (since it becomes a lot harder to manage money when you have none).