MSE News: 'Free' banking system isn't working, says FSA

c-m

I would say being transplant, up front and honest and forthcoming would see banks give equal space on their media to the charges and fines as they do the headline rates when signing up to a product. It would also see them immediately own up to any mistakes, and always act in a fair and reasonable manner.

Many social enterprises are very clear and upfront about their costs. whereas many banks place these details at font size 6 or whatever the FSA minimum is at the bottom of their literature.

Bailey is calling for the cost of products to be made clearer to consumers.
He added: "There is huge pressure on the retail banking industry. But there are huge opportunities to change the model, and above all, give the public what it wants at a fair price, with transparent terms."

There you go. Take it up Bailey, if you think all is fair and transparent at the moment.

Lokolo

c-m wrote: »

I would say being transplant, up front and honest and forthcoming would see banks give equal space on their media to the charges and fines as they do the headline rates when signing up to a product. It would also see them immediately own up to any mistakes, and always act in a fair and reasonable manner.

Many social enterprises are very clear and upfront about their costs. whereas many banks place these details at font size 6 or whatever the FSA minimum is at the bottom of their literature.



There you go. Take it up Bailey, if you think all is fair and transparent at the moment.

I thought I'd challenge that.

http://www.hsbc.co.uk/1/PA_1_5_S5/content/uk/pdfs/en/90030_9_bankacctcards_trav_q1_new_web_jan.pdf

HSBCs pretty clear. Took me only 3 pages from their home page to find it. It's also in PDF format whereby you can increase the font larger for those that have eye sight problems. In paper format I am pretty sure its the law to have a large font copy should you request one.

premierfella

Personally, I'm more than happy with the current "free banking" model (although some banks appear to take advantage - clearly the £35 Clydesdale example is at the excessive end of the spectrum). The banks are probably not happy with the UK "free banking" model though and no doubt rue the day that the free banking model was introduced and would be delighted if the regulator came on board and encouraged a further move away from free banking.

Someone probably has to cross-subsidise somewhere in the system. If there was wholesale change in the free banking model, surely either "monthly fee-paying" customers or taxpayers via government subsidies would have to replace the current "overdraft fee-paying" customers would have to contribute to the costs of basic bank accounts to avoid financial exclusion. The regulator applying caps on fees would seem a better solution that would curb the greatest inequalities whilst retaining the free banking model.

c-m

Lokolo wrote: »

I thought I'd challenge that.

http://www.hsbc.co.uk/1/PA_1_5_S5/content/uk/pdfs/en/90030_9_bankacctcards_trav_q1_new_web_jan.pdf

HSBCs pretty clear. Took me only 3 pages from their home page to find it. It's also in PDF format whereby you can increase the font larger for those that have eye sight problems. In paper format I am pretty sure its the law to have a large font copy should you request one.

Challenge denied as there is nothing to challenge. I said or whatever the minimum font size is.

JRsrule

...those who are overdrawn pay per transaction/bounced DD etc, and those who are in credit and get paid a pathetically low 0.01% interest on their credit balance are effectively funding the bank's ability to lend that money at 5% +

So banking is never really free.

Oh and sorry if my heart doesn't really bleed for all those poor impoverished bankers who are paying so deeply for the financial mess we're in....sorry, the financial mess WE'RE in that mostly THEY caused.

opinions4u

c-m wrote: »

Challenge denied as there is nothing to challenge. I said or whatever the minimum font size is.

Well I suppose the nice shiny £5 reward is slightly sexier than the font used to show all the fees.

http://www.halifax.co.uk/bankaccounts/current-accounts/

But the charges are pretty damned clear for all to see.

JRsrule wrote: »

...those who are overdrawn pay per transaction/bounced DD etc, and those who are in credit and get paid a pathetically low 0.01% interest on their credit balance are effectively funding the bank's ability to lend that money at 5% +

So banking is never really free.

Well it is if you're not borrowing from the bank. Indeed, the link above tells you how to get £60 a year out of a current account.

Oh and sorry if my heart doesn't really bleed for all those poor impoverished bankers who are paying so deeply for the financial mess we're in....sorry, the financial mess WE'RE in that mostly THEY caused.

I'm sure the 30,000 or so made redundant by LBG in the last couple of years were all personally responsible for how the USA's sub-prime lending crisis manifested itself in the Credit Crucnch.

Silly comment of the day. Well done.

tagq2

opinions4u wrote: »

I'm sure the 30,000 or so made redundant by LBG in the last couple of years were all personally responsible for how the USA's sub-prime lending crisis manifested itself in the Credit Crucnch.

Quite - people handwave "bankers!" when they ought to be a little more specific. But if we tolerate the British government pushing the same by underwriting insurance on risky mortgages, or whatever absurd plan it appears to be pushing this week, it'll be the fault of every one of us.

JimmyTheWig

callum9999 wrote: »

The system works fine, the only issue is a group of people who are incapable (or not interested in) working out how to use such a simple system. You go overdrawn without authorisation, you pay a large fee. Hardly rocket science. While "stupid" people do need protecting in law etc., I hardly think it would be fair to legislate to the lowest common denominator at the expense of everyone else.

But if everyone became capable of (and interested in) working out how to use such a simple system, do you think the banks would be happy? Or would they be losing money?

I'm all in favour of those going overdrawn paying the cost of that overdraft, and those going over their limit paying the cost of going over their limit. I don't think it's fair that they should pay more than the cost of going over (them subsidising us) just like I don't think it's fair that they should pay less than the cost of going over (us subsidising them).

I guess the question is, could a bank run a free current account where no-one went overdrawn and make enough money to run it? I honestly don't know the answer to that. In these times of low interest rates I'm guessing not.

Mandelbrot

I found the MSE article less than helpful - something I am sadly no longer surprised at. Very selective quotes and tabloid-type interpretation. But at least it provided a link to the full speech.

The questions that need to be asked about a speech like this, once you strip out all the factual/background filler, are :
What is this guy's philosophy towards his (relatively new) job as bank regulator?
What sort of changes is he likely to want to assist/instigate? and
What power does he have to bring about what he wants?

His philosophy (as expressed) seems to boil down to
"give the public what they want but at a fair price which is transparent to them."

Well, as a member of said public, what I want in terms of a current account is one pretty much like it is already, the existing price that they are paying me seems fair in view of how much I am lending them, and transparency aids both sides in defining the T&Cs of an account. But better wording would often help.

tagq2

JimmyTheWig wrote: »

I guess the question is, could a bank run a free current account where no-one went overdrawn and make enough money to run it? I honestly don't know the answer to that. In these times of low interest rates I'm guessing not.

Financial institutions use deposits so they can declare they have enough real money to make loans - it's not as simple as looking at the 0.5% and thinking "that's all they're making".

But if we were to create a separate department in an existing bank and firewall off all funds and operations except, say, contracts with the domestic electronic payments companies (BACS/CHAPS), and put 1000 "typical" customers into that system, it would be interesting to see what the loss was.

The technological challenge of maintaining a simple accounting system for 1000 people is a weekend project; building an unregulated quasi-bank which isn't trivially insecure is quite feasible - see Paypal - allowing free transfers between own accounts in credit but charging a few pence for withdrawals into a real bank account (as happened when Paypal was smaller). The costs come when you have to worry about printing/handling physical cards and books and involvement in Visa/Mastercard/Amex systems. Some US banks have acknowledged this by setting a separate debit card fee and charging per cheque book.

Of course, if you have a debit card fee then you discourage people actually spending - and if they make enough transactions then you collect the "fee" through that. So what about a, "Debit card optional - £3/month unless you make at least 5 transactions"? I'd certainly not request a debit card for some of my accounts, then. But no policymaker wants to be the first to risk people moving away (good bankers aren't perfect, but they take care to make mistakes in unison!).