How will reclaiming bank charges impact banking discussion

nicky1142

I understand what charges can lead to. Halifax charges are as follows.
over your overdraft £28 and failure to pay a direct debit £39. once you are overdrawn it is hard to get out but there ARE other options that poeple can take instead of ignoring the problem and then getting more charges on top. I see this everyday where people constantly get charge upon charge and say it is the banks fault and get the money paid back into the account. most people know that it was their own fault yet they still go ahead to claim the money back. then they are back the next week with the same query. charges. people dont want to learn

Rex_Mundi

It's one thing people complaining about any amount of a charge (rightly or wrongly). If the charge complied with the law, they wouldn't be able to do anything about it.

The reason they are able to reclaim these charges is because they are unlawful. The banks know this because they are paying out in nearly every single case, and wont go to court to defend these charges.

I agree that some people are irresponsible with money, but I also know that some people have overspent by as little as a pound, and been charged 100s by their bank. I also consider the banks irresponsible when they do this.

nearlyrich

I have no charges to claim back because I have been able to run my account without going over agreed limits in the last 6 years but I wholeheartedly approve of people getting back the charges they have incurred. I am a First Direct account holder too and I don't disagree with what they are doing, it's easy to avoid the £10 a month charge and looking at lot's of SOA postings on DFW board many people who can ill aford it seem to be paying out £10 to £12 or even more per month for "special" accounts.

I remember a few years ago when we paid for every transaction and I can't see it going back to that even if all the banks think they can get away with it on the back of FD taking the stance they have.

rob38

nicky1142 wrote:

I understand what charges can lead to. Halifax charges are as follows.
over your overdraft £28 and failure to pay a direct debit £39. once you are overdrawn it is hard to get out but there ARE other options that poeple can take instead of ignoring the problem and then getting more charges on top. I see this everyday where people constantly get charge upon charge and say it is the banks fault and get the money paid back into the account. most people know that it was their own fault yet they still go ahead to claim the money back. then they are back the next week with the same query. charges. people dont want to learn

I think people are learning fast thats why banks are having to pay back millions. Do you realy think they would give this money back if they didnt have to. Some people have to work all day for £39.00.

thegreatman

Don't abuse your account, :eek: like parking fines Etc. we all dislike them, we all think there to high, There a deterrent don't do it and hey presto you’ll never have to moan about it again.

Tim_L

Tootsie_Roll wrote:

As I and many others predicted we are now seeing posts from people who are on at least their second round of recaliming charges as clearly they haven't learned from past mistakes. What many of us who have worked in the banking profession know is that they have most likely been 'offending' in this way for years and will never learn. Together with the re-claimers who have previously included their overdrafts in bankruptcies and are now trying to make a quick buck they are just making a mockery of the whole process.

This is a fair point, but the question that those in the banking industry must ask themselves is whether these charges exist to generate an income stream, or whether they are there to act as a deterrent. If it is the former, then they are unlawful and will just be ignored.

If they are supposed to be a deterrent to debt then there are better ways of dealing with the problem, including tiered interest rates and account closures for serial offenders. However Banks are falling over themselves to offer people the opportunity of debt, so it is not debt per se that they are worried about, it is maximising income.

Incidentally, it's a bit rich to claim that people asking for their own money back from a bank is trying to make a quick buck. Isn't it actually the banks who were trying to make the quick buck? The best the reclaimers can come out is even, and in many cases people are accepting less then they have paid.

There is a lot of tabloid characterisation here (not specifically in the post I quoted) of people being charged as irresponsible and "dumbed down" serial overdrawers (as if that was the most heinous crime known to mankind, given that banks make money from people in debt!). Most are not - they are in marginal difficulties making ends meet and do not manage their finances to the penny; most people in the country fall into that group I suspect. One mistake can lead to a cascade of charges. Even if they were not unlawful, the charges are regressive because they disproportionately target the less well off.

What staggers me, particularly at MSE which has formerly been a sensible and fairly tolerant place, is how much pure venom is being spat at one group of people by another, just on the basis that the latter group might have to pay for something they used to get for free because the former group is refusing to pay it for them. Perhaps the other side of the moneysaving coin is avarice and "I'm alright Jack" selfishness?

Mark7799

There are two separate arguments here which tend to be merged whenever one of them is brought up and usually obfuscate the whole issue.

1. The level of charges

2. What or whether people can do anything about incurring them

I believe the level of charges to be disproportionate to the costs incurred to the Banks. I recall in my banking days seeing a memo saying that the fee included a level of penalty within the calculation to act as a deterrent to customers who abused their accounts.

I am constantly surprised by the number of people who incur these charges and fail to do anything about their spending habits (yes - I am aware that a snowball effect can occur in some cases and this scenario doesn't apply to everyone). The charges issue has been likened to theft by the Banks in some cases by posters - all I would say here, if someone was "stealing" £50/100 off you every month, wouldn't you do something about it - both in terms of dealing with the thief and changing your behaviour to reduce the possibility of it happening again ? It needs people to be proactive in looking after their accounts and financial education (as well as lessons in resisting temptation:D )

Tim_L

No-one as far as I know objects to the principle of charging costs incurred by a bank because of a breach of an agreement. The issue is that the charges are wildly disproportionate to the actual costs (which is unlawful) and the actual agreements are framed in such a way as to introduce the idea of transgression charging at an arbitrary boundary. If you don't have an arbitrary boundary but simply increase interest rates to cover any increased risk of default, you don't even incur costs. The costs only exist because of the system.

In short, the whole system was designed to ensure that people were charged and that the charges would be an income stream. This is implicitly accepted by anyone arguing that the loss of the stream will mean that banks will want to replace it by other means, including charges.

People have differing attitudes to money and money management, and given the choice there aren't many who would willingly accept charges. But if you are short of cash you may just have to accept that in order to buy the groceries at the end of the month you may get stung by your bank. People have different priorities and situations, and to lump everyone together as dumbed down financial numpties who are participating in the creation of a compensation culture by irresponsibly going a few pounds over an agreed limit to satisfy their crazed consumer desires would be laughable if it wasn't for the fact that the people doing it are deadly serious.

Incidentally, if the memo you refer to was sent, it would be a smoking gun. Partners to a civil agreement are not allowed to impose penalties on one another: this is the job of the courts. No bank so far has publically stated that this is what the charges are. In any case, it's not a very good deterrent, because it appears to be unlawful and hence people can just ignore it. There are perfectly good deterrents including tiered interest rates, which reward those who regularise their situation quickly. At the limit, a sixpence transgression for one day can cost a couple of hundred pounds in a single month, without counting the knock-on effects, however quickly the problem is resolved.

But why would a bank want to deter its most profitable customers from going further into the red, anyway?

bengal-stripe

Tim_L wrote:

There is a lot of tabloid characterisation here (not specifically in the post I quoted) of people being charged as irresponsible and "dumbed down" serial overdrawers (as if that was the most heinous crime known to mankind, given that banks make money from people in debt!). Most are not - they are in marginal difficulties making ends meet and do not manage their finances to the penny; most people in the country fall into that group I suspect. One mistake can lead to a cascade of charges. Even if they were not unlawful, the charges are regressive because they disproportionately target the less well off.

Quite a few people posting at this site and claiming their charges back, have charges on more than one bank accounts and quite a few credit cards as well. That does not indicate the down-trodden, socially excluded single mum on benefits. These people are financially sophisticated and are used to juggle quite a few financial balls in the air. I’ve been there, I’ve robbed Peter to pay Paul (and then robbed Paul to pay Thomas). Juggling might go well for a while, but then your concentration lapses, and you begin to drop balls.

Then there are those people who have charges on credit cards. They certainly cannot claim escalating charges. After all, it’s the nature of the beast, any credit card comes with a pot of credit attached to it. Only after you’ve spent that pot, scraping the bottom of the empty barrel that charges for exceeding the limit or late payments kick in (you can forget a payment once, if it happens regularly you are deep into the financial brown stuff). Yes, the credit cards are to blame as well. If I remember correctly, 25 years ago the minimum repayment was 25%. Now it’s down to something ridiculous like 2 or 3%.

Overspending is like overeating. It slowly creeps upon you and for quite a long while you can pretend, there is nothing wrong with you.

The current situation is untenable and the bank have let it drag on for far too long. They are reluctant to kill that golden-egg-laying goose, but kill her, they must eventually and come up with another solution. In Germany those (punitive) bank charges are not allowed; that has been decided by the highest court in the land. German Banks are ruthless in closing down accounts. Banks in the UK could do likewise. Three bounced Direct Debits and all DDs get cancelled and you loose the ability to set up new ones. Eventually you might end up with an account that accepts incoming money but has no other facilities but a service card to draw out the cash. Then you take the cash to the Post Office to pay your gas bill. It might even give a boost to the pawn broking industry.

Yes, the banks have to come up with a solution pretty quick (they probably are just waiting for that OFT enquiry).

Tim_L

You miss the point. The UK banks don't want to lose these customers, as the casual overspenders are extremely valuable to them.

In fact given a choice between retaining this group of customers and people who manage their finances to the penny to avoid any kind of overdraft, they would certainly keep the former. Bluntly, debtors are more profitable.

What the banks have done is to set up a situation where it is extremely easy for customers to cross an arbitrary line, and when they do it is a fixed fee penalty regardless of the size of the transgression and how quickly it is corrected. If the banks were genuinely interested in deterring debt then they would perhaps introduce tiered interest rates or shut down accounts, but they aren't, so they won't.

There is in short no problem to fix, apart from the hole in their balance sheet that the repayments are causing.

Incidentally, Germany as a country has very different attitudes to debt and credit for historical reasons, and so it's not really a fair comparison.

I really don't know the breakdown of types of people who are being charged. Most certainly there are some who have spent irresponsibly, just as there are penniless single mothers and all points in between - probably most are decent people who are living close to their means. But all pay interest on their borrowing, which is how banks have traditionally charged for credit. The reclaimers are not getting anything more than has been taken from them, and in many cases are accepting less. If the banks feel they can uphold the charges in court they are free to do so. It's ridiculous to attack or blame people who are after all simply arguing that money has been taken from them unlawfully.