The other side of the coin: The case for bank charges

AndieJagain

the Asda analogy above is quite interesting, they, like the rest of the retail sector, provide a crucial service, just like the banks, now, if Asda announced tomorrow they'd charge you £10 a month to shop with them, would you? or would you go to Tesco, who are cheaper anyway.*
equally, why should we pay FD £10 a month for something smile will do for free, and pay us a better interest rate?

*for the sake of this argument, let's assume Tesco are cheaper, and not get into a debate on that!.

Hazzanet

AndieJagain wrote:

now, if Asda announced tomorrow they'd charge you £10 a month to shop with them, would you? or would you go to Tesco, who are cheaper anyway.*

I think the key concern is those joining the bandwagon. When one bank abolished annual fees on credit cards, it didn't take long for all the others to do the same. When 'free' current account banking came in, pretty much everyone followed suit.

If Asda charged £5 to get in their shop, and Tesco thought they could get away with it too, they would. It then wouldn't take long for Sainsburys and Morrisons to follow suit.

AndieJagain

Hazzanet wrote:

Rather than enter in to a lengthy and protracted debate into the whole affair, perhaps I should turn it on its head and ask the question:

Without the application of heavy penalty charges on an account where the contract between the bank and the customer is being broken, what incentive is there for the customer to keep their conduct in order, and remain within the terms of the agreement?

IMHO if charges didn't cause short term pain, there is no incentive to act within the terms of the contract.

and when there's £50 a time in it for the banks, where's the incentive for them to be honest & open in the way they process things?

payments out processed before payments in - in the hope you go overdrawn, then hit you with £50 for each transaction up until they pay your wage in afterwards.

maestro payments out instantly, maestro refund take 10 days??? store (or telesales) keys through wrong ammount, or charges full amount when it should've been 1st instalment (as happenned with my car insurance a few years ago - £300 instead of £60). you're then overdrawn for 10 days & every transaction makes them £50, because they 'can't' (or rather won't, it's left the store's account)process a refund as fast as a withdrawal?.
balance transfers from one account to another taking 3 days?, I have one from FD to A&L leave every friday, arrives every tuesday, that's 4 days per week £100 of my money is in transit, earning one of them two more interest over the year than it is me.

yes, REASONABLE penalty charges, but £50 for going over £2 for the course of half a day, plus £50 for every other transaction in that period is NOT reasonable. I'm happy for them to charge twice what it costs. and what it costs is a 30p letter., I won't include admin, or paper, as the rate they get from Royal mail is significantly lower than 30p per letter, so would therefore cancel out. - and how many letters can you put in envelopes in the space of an hour? 500, easy, therfore less than 2p each in staff hours.

oldfella

Originally Posted by Hazzanet
Rather than enter in to a lengthy and protracted debate into the whole affair, perhaps I should turn it on its head and ask the question:

Without the application of heavy penalty charges on an account where the contract between the bank and the customer is being broken, what incentive is there for the customer to keep their conduct in order, and remain within the terms of the agreement?

---

turning it around 360 degrees - why should a bank gain because I break a contract. It has the right not to loose any money, but that is all.

Mike

Hereward

Hazzanet wrote:

Rather than enter in to a lengthy and protracted debate into the whole affair, perhaps I should turn it on its head and ask the question:

Without the application of heavy penalty charges on an account where the contract between the bank and the customer is being broken, what incentive is there for the customer to keep their conduct in order, and remain within the terms of the agreement?

IMHO if charges didn't cause short term pain, there is no incentive to act within the terms of the contract.

oldfella wrote:

turning it around 360 degrees - why should a bank gain because I break a contract. It has the right not to loose any money, but that is all.

Mike

Why not try the best of both worlds? Only allow account providers to cover their costs, but each account holder has a number of “free” passes, after which the bank can close the account. This would enable a incentive to maintain your account in a reasonable manner, but would not financially punish the offender.

Hubert_Dalrymple

Hazzanet wrote:

Rather than enter in to a lengthy and protracted debate into the whole affair, perhaps I should turn it on its head and ask the question:

Without the application of heavy penalty charges on an account where the contract between the bank and the customer is being broken, what incentive is there for the customer to keep their conduct in order, and remain within the terms of the agreement?

IMHO if charges didn't cause short term pain, there is no incentive to act within the terms of the contract.

The incentive to keep within one's contract is the ability to spend money. If you are overdrawn then you can't spend any money. A further incentive is that the bank might decide you are poor risk and take away some or all of your privileges or decide to close your account.

I reiterate: how I conduct my account is a matter purely for me and my bank. It has absolutely no effect on anybody else's account. You might not like the fact that I break my contract but that is no business of yours. People have got to move away from the idea that they are somehow harmed by other customers breaking their contracts. The breach does not cost disinterested parties a penny.

Hereward

Hubert_Dalrymple wrote:

I reiterate: how I conduct my account is a matter purely for me and my bank. It has absolutely no effect on anybody else's account. You might not like the fact that I break my contract but that is no business of yours. People have got to move away from the idea that they are somehow harmed by other customers breaking their contracts. The breach does not cost disinterested parties a penny.

Individually, how people mange their accounts has no impact on others; however, collectively people's ability to mange their affairs can be a significant risk to others as those who mange their accounts poorly could force the account provider into banckrupcy. I admit this is a remote possibilty, but it just could happen.

JohnPeard

Hazzanet wrote:

Without the application of heavy penalty charges on an account where the contract between the bank and the customer is being broken, what incentive is there for the customer to keep their conduct in order, and remain within the terms of the agreement?

The argument the banks use about excess charges is they consider that there is NO breach of contract, so the notion of 'penalties' is irrelevant. They are simply applying agreed charges.

Why, one may ask, is there such a lot of debate about whether these charges are lawful or not? We have a system for settling this - i.e the courts.

So why are the banks simply not defending that position? They would only have to do it once, and that's the end of the matter.

Or am I am being a bit simplistic here?

Noz

can small claim courts set precedents?

Hubert_Dalrymple

Cases heard on the small claims track, or indeed any other case heard in the County Court, cannot set a precedent. Only cases from the High Court and above have the force of precedent.

The reason the banks won't defend, in my opinion, is that the law is actually very, very clear and simple. Penalty charges cannot be enforced because the only damages anybody is ever allowed to claim in any civil action is their actual loss. No party is allowed to make a profit out of a civil action. The Courts are there simply to decide who is at fault and work out how much the fault cost the innocent party.

With respect to penalty clauses in contracts, the line of binding authority on this is so explicitly clear that there seems to me to be very, very little room for the banks to wriggle. This is why, instead of pursuing defences through the courts, they have adopted this public relations strategy of suggesting that non-defaulting customers are going to lose out if they can't punish defaulters. This is a legal and logical nonsense, but as the foregoing conversation shows, it has been extremely and depressingly effective.