How will reclaiming bank charges impact banking discussion

BigBudgie

Excellent theory Smasher and totally spot on.

In support of this theory one only has to look at the way the charges have increased dramatically over a relatively short period of time. Of course, if one believes the banks arguments, the increases are due to increased costs or investment in facilities so that the banks could offer the “complete package of services”. But the more realistic, real world dwellers, totally understand that both the charges themslves and the ridiculous increases were/ are totally fuelled by greed.

I don’t think anyone objects to having to pay a charge if for whatever reason their account goes into an unauthorized overdraft situation. What hundreds and thousands of people do object to are grossly unfair and or unlawful charges. Following defeat in the test case, subsequent appeals and the production of the OFT report into charges it is obvious that the Banks will eventually be forced to set charges at a level which basically covers their costs. The backlash and fall out from that situation should in theory change the face of UK banking forever. Sadly, I have my doubts that it will. <O:p</O:p

IvanOpinion

Nathan_Spleen wrote: »

As for my ''emotional argument of 'fleecing' '' and your contention that ''the factual argument is whether or not the charges are 'fair; or 'unfair' '' I would be very happy to place a substantial wager with you that the charges will indeed be ruled unfair but I somehow suspect you'll decline.

If you check back far enough in my posting history you will see that I have stated several times that I too believe they will be found to be 'unfair' ... I am undecided though on whether that will be a political or legal decision ... that is not and never has been the crux of my argument.

Ivan

IvanOpinion

Smasher wrote: »

If it is against the law and/or unfair, then yes you can divorce it from any changes that might follow. It would simply have been an unlawful/unfair practice that was stopped.

I can see your point but the reaction is a direct response to an event that caused it to happen .. therefore I do not believe they can be divorced. How do you know any of the new products will be more 'fair' and for who will they be 'fair' ... many people are likely to find that any new system is less 'fair' to them (I suppose it means more work for Martin .. and another little ditty from that group). One possibility is a resurgance of both the legal and illegal loan shark who really prey on the vulnerable. Just because a system is different does not mean it will be better.

If, after that, banks go after other people to fuel their greed, then it is because the bank is relentlessly greedy, not because a bunch of people stood up for their consumer rights.

Be careful what you wish for because remember your pension (even if you are unemployed) has a certain dependency on the performance of banks. It is easy talking about the 'greed' of another company but equally I am sure that others talk about the greed of your employer (assuming you are employed) ... how do you reconcile these two?

Ivan

rjm2k1

I really doubt that they will find bank charges to be illegal as that would throw the whole thing on it's head and cause chaos in the industry. I don't think that at any point charges themselves have been declared illegal, it's just the level of charges is viewed as potentially "unfair", so I doubt very much that the judge will go further than necessary and declare charges themselves to be illegal.

What is more likely to come out of this IMHO are 3 recommendations :-

1. That banks make it clearer that customers going into the red will be charged for doing so.

2. Customers can opt to not have their account go into the red, which will cause a subsequent issue with the company whos payment was rejected. Potentially, banks will be permitted to force repeat offenders into a bank account which will not allow them to go overdrawn.

3. The level of charges will be self regulated by a body made up from members of the banking industry.

dzug

The bit I have difficulty in reconciling is that the law (allegedly) says that a bank cannot charge more than it 'costs' (whatever that may mean) for an unauthorised overdraft but that it can charge costs AND profit for an authorised one.

So it is cheaper to go into the red unannounced that to arrange it in advance. Cheaper to break a contract than to make the one you need.

Doesn't really sound logical to me.

Smasher

rjm2k1 wrote: »

I really doubt that they will find bank charges to be illegal as that would throw the whole thing on it's head and cause chaos in the industry. I don't think that at any point charges themselves have been declared illegal, it's just the level of charges is viewed as potentially "unfair", so I doubt very much that the judge will go further than necessary and declare charges themselves to be illegal.

The thing is, this test case is not addressing the the legalities of the hundreds of thousands of claims that have been made up until around September last year. I'm quite certain that if one of those cases (the ones that were defended on the basis that charges only cover the costs incurred by the bank), of which there are many currently halted in the system, were used as a real test case, the charges would be found to be penalty charges & therefore unlawful.

I do find it quite ludicrous that the OFT decided to sweep the main issues that have been in contention all this time under the carpet & run a case for something else entirely. It was like saying, "here you go bankers, you got a month to get creative with your T&Cs & legal arguments & we'll argue in court about whatever you have in place by then and ignore all the legalities of the vast majority of cases that brought us to this point".

rjm2k1 wrote: »

What is more likely to come out of this IMHO are 3 recommendations :-

1. That banks make it clearer that customers going into the red will be charged for doing so.

2. Customers can opt to not have their account go into the red, which will cause a subsequent issue with the company whos payment was rejected. Potentially, banks will be permitted to force repeat offenders into a bank account which will not allow them to go overdrawn.

3. The level of charges will be self regulated by a body made up from members of the banking industry.

No 2 should be compulsory IMO. Banks can already force customers to have an account that will not allow them to go overdrawn but they wouldn't do that because these people are such easy cash cows.

I am my employer, people can say I'm greedy if they like, but I provide a genuine service for the money I charge and I can demonstrate exactly where every penny goes with honesty.
If my pension or any other financial interest is affected by the greed of the bank, then I will consider that it is because the bank is greedy, not because a whole bunch of spoilsports complained about being ripped off.

Smasher

If your kids came home from school & complained that the school bully started picking on them today. Would you: a) complain about the bully or b) complain about the kids he was picking on until today for standing up to him?

IvanOpinion

rjm2k1 wrote: »

What is more likely to come out of this IMHO are 3 recommendations :-

1. That banks make it clearer that customers going into the red will be charged for doing so.

I am not sure how. If people would read the information they already get then they would understand this

2. Customers can opt to not have their account go into the red, which will cause a subsequent issue with the company whos payment was rejected. Potentially, banks will be permitted to force repeat offenders into a bank account which will not allow them to go overdrawn.

This one concerns me a bit because you end up with people (usually the most vulnerable) standing at checkouts in the embarassing position of their cards being rejected. I would prefer that all accounts came with an authorised overdraft of £10-20 with the customer having to explicitly confirm that they know they are going into this (e.g. an additional prompt before entering the PIN). Once they hit the £10-20 limit then the card would be blocked .. interest would be charged but no fee (and the bank would be under no obligation to write to the customer to tell them they were overdrawn).

3. The level of charges will be self regulated by a body made up from members of the banking industry.

Very likely however it could lead to a more confusing charging structure with different letters for different reasons costing different amounts (e.g. auto production may cost £5, while custom letters could cost £15 (or should that relate to the amount of effort/time an operator spent on it)). If banks are allowed to charge based on actual costs I can produce at least one example of where a (non banking related) letter being issued would have cost every customer receiving it £60 ... a cap will need to be applied.

Ivan

Dylanwing

1. That banks make it clearer that customers going into the red will be charged for doing so.

I think that this is a 'seen to be doing something' solution, rather than anything useful. Nationwide take the fees the Month after they are incurred, and this can make a massive difference - That should be compulsory, whatever level the fees are set at. Looking at the new 'transparent' fees, it seems that the Banks are determined to keep the cash cow flowing and increase the UK consumer debt problem. They need proper regulation!

Tozer

dzug wrote: »

The bit I have difficulty in reconciling is that the law (allegedly) says that a bank cannot charge more than it 'costs' (whatever that may mean) for an unauthorised overdraft but that it can charge costs AND profit for an authorised one.

So it is cheaper to go into the red unannounced that to arrange it in advance. Cheaper to break a contract than to make the one you need.

Doesn't really sound logical to me.

Not quite right. The legal position is that a default charge (being a form of liquidated and ascertained damages) must be a genuine pre-estimate of the loss likely to be suffered in the event of the breach (the unauthorised overdraft). It can go beyond its pure costs.