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

ashcarrot

A tax on silly people

JuicyJesus

Alpine_Star wrote: »

The OFT Personal Current Account Market Study found that banks derive significantly more revenue (through net interest income) from those that keep their accounts in credit than from unauthorised overdraft charges incurred by those who overdraw.

OK, that's revenue - what about profit?

Personally I think having free banking unless you go overdrawn or bounce stuff is perfectly transparent. The FSA though are well known as wanting explicit charging for everything, rather than implicit (see admin charges on insurance).

dunstonh

Part of the problem is the way over the last decades that people have given up their responsibility to focus on their rights.

Go back in time and you find that getting a debt, other than mortgage, was seen as a bad thing. Then over time, getting a loan was ok but an overdraft was viewed dimly, let alone taking the banks money without permission. Then overdrafts and credit cards became acceptable.

Now you have the situation where some think that taking the banks money without permission is acceptable and that they shouldnt have to pay for it when they do.

On the subject of cross subsidy, one of the biggest areas of cross subsidy comes from business banking customers. The system is full of areas of cross subsidy.

The FSA though are well known as wanting explicit charging for everything, rather than implicit (see admin charges on insurance).

The RDR coming in 2013 is all about making people pay the same/similar amounts and kills off significant areas of cross subsidy. That has been said of the RDR for years but the FSA still denies it publicly. However, the pre RDR method was all about the wealthy cross subsiding the less wealthy. IF everyone is paying the same then its clear that the wealthy will be better off and the poorer worse off. So, I dont think its so much about your wealth position but more about the principle in the FSAs eyes.

Martinslovechild

This old chestnut has been doing the rounds for several years now.

If (and not necessarily 'when') the banks are forced to separate retail banking from investment banking (not currently scheduled to happen until 2019, by which time there'll be a new government in power and the banks have over 7 years in the meantime to lobby government to either water the measures down or eradicate them completely), those changes are going to cost the banks billions. Before this happens, I would expect the banks to use every trick in the book such as:-

• threatening to move their headquarters away from London to abroad (with the obvious loss of thousands of jobs)
• charging a fee for current accounts
• hiking interest rates on SVR mortgages (as an aside, these have been increasing in 'real-terms' since the beginning of the credit crunch. Offsets used to be somewhere in the region of Base Rate + 0.5%, many mortgages taken out since 2008 have a much greater offset percentage)

Because customers will become upset at these 'proposals', the government will most likely look to become more passive, allowing the banks to get exactly what they want - i.e. no changes, no new laws. This will in turn allow them to get on with what they do best - making lots of money for themselves to the detriment of many hardworking people.

callum9999

tifo wrote: »

Didn't they win the test case in 2009 based on the fact that the overdraft charges subsidise the free banking for everyone else and are a 'service charge' triggered by a returned payment?

If that subsidy stops, then who's going to pay for the free banking?

I'm sure that helps yes, but other countries with paid-banking have similar charges.

Us, obviously. I've already told you twice that if people start sticking to the rules I'd be happy (annoyed I'm paying more yes, but fair is fair) to start paying for my bank account. Why do you keep ignoring that?

vintagegirl

'Clydesdale Bank, for example, charges £35 per transaction if you're over your limit.'

thought id clear that up for a start, clydesdale charges are nothing of the sort.
it's £35 per bounced item

£25 monthly fee if you're overdrawn the month before

and only a £25 daily fee for every day you're overdrawn by £25 or more and still keep on spending

Evilm

Going to a fee based service doesn't mean that charges will go down. Look at the US: They still have just as high overdraft fees, bounced cheque fees and even cash banking fees/ cheque clearing fees and a lot more. They also have to pay to get cheques printed with their account details on and don't get a cheque book from the bank.

It won't make a difference to any of the charges -I wouldn't even expect they would drop in £ per charge! It will just mean the responsible customers get hit for even having a bank account and the non-responsible get hit for having a bank account and for the charges for the services they use/abuse!

NFH

It's quite simple. The banks should continue to provide current accounts free of charge, but with incidental charges for the following:

• Transactions at the bank counter, e.g. paying in cheques or cash
• Writing cheques
• More than 2 cash withdrawals per month at other banks' cash machines
• Transactions conducted by telephone banking via a human
• Paper statements

In this way, customers who incur costs for the banks would pay; those who conduct their banking efficiently would not pay.

tifo

Alpine_Star wrote: »

And so it can be argued that the category of consumers who keep their accounts in credit actually subsidise the group that don't. But of course such is the lack of transparency of the true cost of retail banking people like you are fooled into thinking otherwise.

The banks didn't say this in the test case at the highest courts in the land. They said overdraft charges from about 30% of accounts pay for free retail banking.

Now they want to say the opposite?

What transparency?

Should this go back to court?

alanq

You make an agreement with the bank. If it cannot get you to stop misbehaving by imposing stiff penalties it will use other means such as closing your account.

Didn't I read somewhere that it is a criminal offence in some countries to knowingly authorise payments in excess of ones balance / approved overdraft?

How would people moaning about the current situation feel if the above measures were introduced?