MSE News: Halifax to raise overdraft charges for customers deep in the red

JuicyJesus

Consumerist wrote: »

Whilst I accept the thrust of the above points by JuicyJesus and meer53, I think what seems unfair about the current state of affairs is that overdraft charges are disproportionately loaded against those with small and occasional overdrafts in favour of those with large and consistent overdrafts; the latter group, however, would seem to be the greater credit risk.

That bit I'd agree with. Halifax's daily charges for small overdrafts are ridiculous. Mind you, I would say that, as I don't like Halifax (I have a great deal of contempt for most ex-building society pretend banks).

However, it's a free market, and there are plenty of other banks who still use the usual way of calculating charges for agreed overdrafts (i.e. interest). It's within your power to use one of them if you so desire. Similarly, if you wish to borrow money from Halifax, they do make it clear what they're going to charge.

opinions4u

Consumerist wrote: »

Whilst I accept the thrust of the above points by JuicyJesus and meer53, I think what seems unfair about the current state of affairs is that overdraft charges are disproportionately loaded against those with small and occasional overdrafts in favour of those with large and consistent overdrafts; the latter group, however, would seem to be the greater credit risk.

But others thought the previous charging structure was disproportionately loaded against those who abused their overdrafts.

So they changed it.

Some think the current system is disproportionately loaded in favour of those who never overdraw.

Let's hope they don't change it again.

Consumerist

opinions4u wrote: »

But others thought the previous charging structure was disproportionately loaded against those who abused their overdrafts.

It seems reasonable to me to disadvantage those who abuse a facility. Halifax have always had the option to withdraw an overdraft facility from those who abuse it. Why didn't they use that option?

Some think the current system is disproportionately loaded in favour of those who never overdraw.

I wholeheartedly agree with that sentiment - even though I don't use my overdraft facility. Banks tend to prefer to generate a spiralling debt situation. Primarily, I suspect, to allow them to offload the debt to third parties rather than deal with the problem they have helped to create by profligate extension of credit.

Let's hope they don't change it again.

Let's hope they do. But, of course, they won't until forced by regulation or legislation.

JuicyJesus

Consumerist wrote: »

It seems reasonable to me to disadvantage those who abuse a facility. Halifax have always had the option to withdraw an overdraft facility from those who abuse it. Why didn't they use that option?

Because the reputational damage they would suffer from abruptly pulling the rug out from under thousands of people was, presumably, considered to be far greater than it would if they increased charges on that same group.

That's one potential reason. I'm not defending Halifax, for what it's worth, I think their whole charging structure is moronic, but they must have solid reasons for not doing so.

Banks tend to prefer to generate a spiralling debt situation. Primarily, I suspect, to allow them to offload the debt to third parties rather than deal with the problem they have helped to create by profligate extension of credit.

There are numerous people who work or have worked at banks on these forums, and I don't think you'll find a single one who'll back up the claim that there is a systematic policy where they want to get their customers into spirals of debt they can't escape.

It wouldn't even make business sense. Why would a bank want lots of bad debt they'll either write off or sell at a massive loss to a debt collection agency when they could lend to more credit-worthy people and not only get their money back in full but levy a rate of return on top as well?

Consumerist

JuicyJesus wrote: »

Because the reputational damage they would suffer from abruptly pulling the rug out from under thousands of people was, presumably, considered to be far greater than it would if they increased charges on that same group.

So it's ok to overcharge those who occasionally go into the red in order to bail out those who are perpetually in the red?

That's one potential reason. I'm not defending Halifax, for what it's worth, I think their whole charging structure is moronic, but they must have solid reasons for not doing so.

Banks prefer easy profits to fair banking.

There are numerous people who work or have worked at banks on these forums, and I don't think you'll find a single one who'll back up the claim that there is a systematic policy where they want to get their customers into spirals of debt they can't escape.

True. Not one will admit that banks are dishonest. But it doesn't take long to know who they are.

It wouldn't even make business sense. Why would a bank want lots of bad debt they'll either write off or sell at a massive loss to a debt collection agency when they could lend to more credit-worthy people and not only get their money back in full but levy a rate of return on top as well?

Simple. Add unjustifiable charges day after day until the "debt" has spiralled out of control then sell it off to wash your hands of it. Take a £20 debt, add £300 charges, sell for £50 and make a handsome profit from the process. Makes brilliant business sense to any crook.

JuicyJesus

Consumerist wrote: »

So it's ok to overcharge those who occasionally go into the red in order to bail out those who are perpetually in the red?

That's not what I said. What I did say is that I think Halifax's charges are idiotic. But they have every right to levy them, and clearly on this issue they weighed up the pros and cons and went with the option that would upset people the least.

Banks prefer easy profits to fair banking.

Banks are businesses. Businesses generally prefer profit. Quite why you phrase it as surprising or shocking that banks intend to make easy profits I don't know.

True. Not one will admit that banks are dishonest. But it doesn't take long to know who they are.

So basically, it's just something you think is happening therefore it is? Until there is concrete proof that banks prefer to deliberately encourage their customers to enter spirals of debt and generate bad debts then I will be quite happy to believe otherwise.

Again, there are many people on these forums who work for banks and some who used to but have left very acrimoniously, and no doubt someone would blow the whistle if this supposed policy actually existed, especially in the culture at the moment where banks are evil on par with the Third Reich. I'm sure if there was such a deliberate policy, we would have been told about it by now.

Simple. Add unjustifiable charges day after day until the "debt" has spiralled out of control then sell it off to wash your hands of it. Take a £20 debt, add £300 charges, sell for £50 and make a handsome profit from the process. Makes brilliant business sense to any crook.

So, in your example, this £20 debt, they profit by, what - £30? Hardly seems worth it when a repaying customer could make them many times that. And of course you fail to factor in that administrative costs exist for all accounts, with accounts in arrears more expensive, that collections teams cost money, that sending letters to people asking them to repay their debt costs money, that staff to manage out of order accounts cost money... which comes out of that £30.

Your idea is that banks will be overjoyed with the miniscule profit they'll get from selling a bad debt to a debt collection agency? And that they would rather have that miniscule profit than the ongoing profit from a customer who pays their debts? Are you serious? Are you genuinely suggesting that banks are the only business that is deliberately hoping their customers don't pay them?

meer53

Consumerist, you talk a load of rubbish.

When a bank sells a debt to a debt collection company it is after many weeks or months of trying to help the customer. It's an absolute last resort, don't you think a bank would rather negotiate a payment plan to recoup their debt rather than sell it off for a fraction of the actual cost ?

The only people who get into debt are the people who refuse to accept that they need to get to grips with their finances, stick their head in the sand and ignore the charges which are applied because of their own mismanagement.

You've probably gathered that i work for a bank, i deal with people in financial difficulties, there is always a solution for whatever problems a customer may have, as long as they speak to us. The debts that get passed to the DCA's are the ones who pretend it's not happening and ignore any offer of help, or don't stick to the agreements we make with them.

We don't allow customers to run up debts willy nilly, they are contacted at the first sign of any problems, (usually when they first go over their overdraft) we also have systems which monitor how an account is used, eg, reliance on PDL companies, gambling transactions etc. To say that banks encourage customers to incur fees is ridiculous.

Consumerist

The sad thing is that you really must believe what you are saying.

JuicyJesus

Consumerist wrote: »

The sad thing is that you really must believe what you are saying.

So meer53 has personal experience as to how banks deal with such things and you have... what exactly? Conspiracy theories?

meer53

Consumerist wrote: »

The sad thing is that you really must believe what you are saying.

You really should get out more, speak to people in the real world maybe ?

I feel quite sorry for someone who is so blinkered and bitter.