How will reclaiming bank charges impact banking discussion

bank_charge_debate

Hello there money saver. Please bare with me and read what you can, if you want the short and brief of everything skip below to the numbered points.

Now I’ve been following this whole bank charges situation with interest from the early on and have been a keen follower on this forum. I am a registered user under a different user name, however have decided to post this under a different name as I know this could become a heated discussion, and I wouldn’t want people looking upon my posts in other discussion in unfavourable light due to what I might bring up here. Now just to clear the air about myself. I’ve never posted in this part of the forum before, I have been charged myself and feel it is unjust and also I have previously worked for a major bank in a customer facing role so have felt the full impact of this reclaiming bank charges issue.

The question I have to ask however is, what will the court case mean for us all?

Now I felt at the beginning, even when I was working for the bank, that it was great to see people reclaiming charges. However once the issue became mainstream and more and more were reclaiming it obviously meant the banks had no choice but to try and defend their stance otherwise they would end up paying to everyone claiming.

What I want to try and discuss is whether we will be better off or not if the court rules in favour of the public, and that the bank fees are unlawful. What will happen? Will the banks be forced to repay all the fees to everyone for the last 6 years within a set timescale? Will each person have to contact the bank to reclaim their dues? What will it mean for banking in this country? And what will it mean for the banking institution and the economy as a whole?

If the banks lose:

1) Then surely with that their share prices will drop dramatically just like northern rock’s have within the last few months. This will obviously depend on whether they have to pay back all fees from the last 6yrs or whether each person has to claim separately.

2) Due to the above, with share prices dropping, this would result in the stock market being affected as a whole. This would then have an affect on investments and also pensions (I know pensions are investments however I’m listing pensions separate in the terms of final salary pension schemes), especially people due to retire within the next few years. Final salary pension would be hit hard and a lot of schemes, due to being badly run over the past few years, would fall back into deficit again.

3) Then the banks would obviously end “free banking” (using the term loosely as per the outcome of the OFT’s report) which would end up costing everybody as a whole, rather than just those who for either their own fault, or bank’s fault or reason’s beyond their control, have incurred charges, which supplement our free banking. They would no doubt implement a charge per transaction which would equal or in turn increase the amounts they would have earnt from penalty fees.

4) Then they will no doubt lay off staff and reduce the number of staff in retail banking. This would probably lead to worse customer service for us, but a quick way for the bank to cut costs due to the dramatic amount of money it would cost them to repay overdraft charges. This would affect employment figures with people being laid off and another credit crunch possibly happening

5) The banks would have to recoup their losses somehow. Apart from ending free banking they might increase their default lending cost, leading to an increase for everybody with mortgages, loans and credit cards (which lets face it is nearly everyone in the UK)

6) The banks would become targets for foreign takeovers, which would lead to once again reduction in staff and a change to the current way of banking. Or rather than foreign takeovers there could be consolidation the market with smaller banks being merger/bought out by the larger banks, this leads to less competition which then means less choice and chances of a bargain for us.

I’m sure there are more points to be raised. But the question I’m trying to ask is:

If the banks lose and have to repay, will we actually turn out to be worse off than we were before?

I know the above can be seen as hypothetical or even as scaremongering by some, however every point can be considered valid as the banks are just business there to make a profit. We invest in companies that make profits so that we can make our money grow whether we do it in our own investment products or through a company pension scheme. Please let me hear your opinion/views/thoughts on the above points or any that you believe might be raised.

(For the record I do feel that charges are too high, and I do feel that the banks will win the case for a few reason. Firstly the judge will have taken into account the wider scope of the issue and probably say that the charges are not unlawful but in “some” instance are too high. I think the charges might be reduced to the credit card £12 limit. However I believe the banks will put forward a very good argument for the cost of the charges. We all look at the cost of the charges as a simple “computer prints letter”. However I think the banks will put forward a much more complex argument. The banks will say. Yes the computer does make most of the decisions; however sometimes there is manual intervention. However they will bring into the cost of the charges the following
a) Cost of running the computer system
b) Cost of employer (HR, Training, pension etc)
c) Cost of buildings
d) Cost of Heating and electricity

The amount it costs to answer a query regarding a charge everytime a customer pops into a branch, phones or writes. They will bring in stats stating how much time on the phone, branch etc is spent answering bank fee questions and break that down as a cost. They will also say that their lending/bank charge centralised department costs them X amount, which includes the building cost, heating, electricity, staffing etc etc

And I have no doubt by the end of it they will have worked out that the amount of time and effort spent answering bank charge queries will be equal to either somewhere near the current charge amount or even above it.)

piggeh

1 & 3 are slightly mutually exclusive. Why would share prices drop? Because banks ae making less money as a result? But then if they implement a charge for banking services they will recoup whatever they were losing, and more importantly this will be a steady income rather than only consequential, irregular income. It would probably be a preferential method for most banks.

All other arguements seem to be based around banks losing money. They wont lose money but only make less than they do currently until they introduce a different way of making this money back. They wont lay people off because of a short term hit as people are assets like anything else - in the banking sector especially there is a great deal of trustworthiness needed and a lot of training for various positions. I couldnt imagine they would scrap all these trained trusted personnel because of a short term hit on profits.

To be honest I would rather pay £3 a month in bank services fees than suddenly find a £35 deduciton form my account when I'm a bit short. One is much easier to budget for than the other.

Really I think most aspects wont change. They're most likely to introduce a small charge a month but cant see much of a follow on effect beyond that. Courts will be busy though.

IvanOpinion

piggeh wrote: »

1 & 3 are slightly mutually exclusive. Why would share prices drop? Because banks ae making less money as a result? But then if they implement a charge for banking services they will recoup whatever they were losing, and more importantly this will be a steady income rather than only consequential, irregular income. It would probably be a preferential method for most banks.

There will be a short term loss that will affect thousands of peoples with products about to mature however, as I have said many times, some people will win a small battle .. it will however cost everybody the war.

All other arguements seem to be based around banks losing money. They wont lose money but only make less than they do currently until they introduce a different way of making this money back. They wont lay people off because of a short term hit as people are assets like anything else - in the banking sector especially there is a great deal of trustworthiness needed and a lot of training for various positions. I couldnt imagine they would scrap all these trained trusted personnel because of a short term hit on profits.

What we have to remember that the profits made within the retail arm of banking are small within the overall bigger picture .. also, overheads within retail banking are considered to be high. More and more people are turning to internet banking which is beneficial to everybody (the banks have less overheads, customers get a better interest rate). I personally think that several banks will use any short term loss as an excuse to close down many high street branches.

To be honest I would rather pay £3 a month in bank services fees than suddenly find a £35 deduciton form my account when I'm a bit short. One is much easier to budget for than the other.

I would also love to pay £3 per month, unfortunately it is more likely to be in the region of £10-20 per month. It is likely that there will still be free banking but it will involve poor interest rates and NO credit (i.e. debit card only). In the main the ones affected the most will be those that manage their money responsibly but don't earn enough to be considered 'prime' and at the end of the month have little left over ... they may well not qualify for the 'better' products and suddenly get lumped with this monthly charge. At the upper end free banking will probably exist as the banks try to get the money by offering free/cheap policies if, for example, you deposit £1000 or £2000 per month. At the very top end there will still remain the mega expensive products offering all sorts of things (Amex Centurion anybody ).

Really I think most aspects wont change. They're most likely to introduce a small charge a month but cant see much of a follow on effect beyond that. Courts will be busy though.

Several of the changes have already been feeding through into the market with loan, mortgage and cr card interest rates rising beyond the increases made by the BoE ... on the other hand savings rates for many accounts have not been raised in line with the BoE changes either (some have some have not).

As I have mentioned before I have been hearing some whispers about changes to the credit card market ... oddly enough some are being driven by the retail sector.

Ivan

Aaron

bank_charge_debate wrote: »

If the banks lose:

1) Then surely with that their share prices will drop dramatically just like northern rock’s have within the last few months.

Firstly, as northern rock showed, share prices have a lot to do with other factors, such as confidence, and not just results.

Secondly, not all banking service providers rely on their share prices: building societies, credit unions (who I think can now offer current accounts with debit cards), probably the co-op bank and maybe others.

After that, the rest of your chain of consequences collapses. Maybe some of the big banks will try charging more people - you know the sort, the ones with customers who they could stab and they'd still keep their accounts with the bank that does nothing but profit from them - but I doubt free banking would vanish completely.

agnes_2

Hello IVANOPINION hope this is an approriate site? I have given a great deal of thought, time and indeed incurred costs in producing a mountain of paperwork, etc.etc. within the process of claiming over the last twelve months, therefore again I respond.

QUOTE Ivanopinion:
have you read 'don't sign it if you disagree with it' ... there has always been a choice

This is a wholly inadequate statement. Bank accounts in 2008 and long before are a utility in exactly the same way electricity is. It's not choice issue but one of absolute necessity in order to survive as a human being above cave man status. You cannot blandly put bank accounts into the same category as something you might choose to buy
and be taken seriously. And why do think there is a UTCCR? It's because there are contracts with unfair terms and conditions and if proved as such are unenforceable and invalid even if you sign them.

Quote:
The media likes to get its hands on mass appeal stories and exaggerate them to appeal to what people want to hear while hiding much of the reality

Again a bland one-size-fits-all statement that you could attribute to any news topic to suit your stance. This is schoolboy stuff.

Quote:
would you think it right for customers to be charged (e.g.) £60 for a letter they did not ask for and did not want, but it is a provable cost for the production of that letter? That is the other side of the coin that you are not being told.

You base this point on ''provable costs'' but the fact that the costs have not been provable completely invalidates your entire argument

Quote
The sad reality is that it is more than likely that as a result of this campaign it will be the most vulnerable that will end up losing the most

This is merely a baseless assumption What economic data do you base this ''reality'' on? Where's the evidence? Point me in the direction of ANYONE with at least 1 o-level who shares this view.

Quote
Those that get their charges back will have won their little battle against the banks, however the one thing guaranteed is that the banks will win the war and get the money back from anybody with an account

err hello? If the banks get there ''money back'' from anybody with an account then the war IS won.

Edna_Bucket_2

IvanOpinion wrote: »

...His mortgage deal runs out in December and so far he says his mortgage applications for cheaper products have been turned down by two different building societies (both of which he had claims against). This means he is now having to look at mortgages that have higher rates.

I have no idea if these rejections relate to his claims or a general tightening up of credit .. or possibly both? If it is related then it seems a little bit petty but then one has to remember that there is no such thing as a 'right to credit'

Ivan

Agreed - it might be petty.

But there is a right for any business to refuse to trade with people it doesn't want to trade with, and in a democracy we should defend that right of course.

As I've said before, if you threaten to sue someone, or actually do, you wouldn't expect to trade with them ever again. I certainly wouldn't, so I wonder why some of these claimants think they are any different?

If you go ahead and take action against a bank, it would be safest to assume that you will never be able to have an account with them again in your life and make your decision on that basis.

Justin12_2

Hi this is my first thread. I did do a search but could not find the questions answered already.

First I would like to state that I do agree that charges for going overdrawn are too high especially when you read stories about people being able to reclaim 1000's. Anyway my question is really two fold:

1. If the banks should lose the case about being able to set the rate for their charges could they potentially get together and create a "blacklist" of "undesirable" customer ie customers who have successfully reclaimed their charges thereby ensuring these customers are unable to open accounts with them in future. I know at the moment customers going overdrawn are a HUGE money revenue for them but what if they decide to get "nasty" should they lose.

2. Again if they lose the case would the banks be able to state in their terms that anyone depositing less than let's say £1500 or more a month will have to pay £20 or so a month for running their account and thereby creating a system where only the more well off would benefit from free banking? What would people do then. Some customers are of course on benefits etc and for them (and of course most people included) £20 would be a lot of money to have to pay every month.

Sorry if the questions have been answered before.

Thanks in advance

stewarttweedie

I was wondering the exact same, as I am in the process of waiting on the outcome of the test case to see if I am going to be able to recoup my charges from the Abbey.

By the way, the Abbey in the past few months has reviewed its charges on overdrawn accounts and now has a tiered scale, depending on how much you have went into the red. Is this an admission of guilt on their behalf?

jonesMUFCforever

Banks can refuse to open an account for you now similar to a shop or pub refusing to serve you.
They do not have to give a reason.

It is a possibility that they might charge for banking in the future (go back 25 years and it was fairly common).
I think the Government will make sure that basic accounts will remain free but whether the bank will open one for you will be up to them.

Phoenixx73

MY question is... is there a viable alternative to highstreet banks? an alternative that dosnt have shareholders to make rich and would have no interest in fleecing its customers?