Time to end free banking? Poll help needed

antrobus

dzug1 wrote: »

But it isn't market forces - it's highly regulated market forces. Whether over regulated or underregulated or just right is a matter for debate but please don't think it's a free market

Of itself, regulation doesn't preclude the operation of a free market. Insurance companies are regulated, but the market for (say) motor insurance is still pretty competitive. So the debate isn't about the nature of banking reulation, it's a debate about the level of competition in the PCA market which is something quite different.

innovate

dzug1 wrote: »

The logic for charging is based on the premise that those who use a service should pay for the costs of it plus a 'reasonable' profit for the supplier. And the more precisely the user pays those costs, the 'fairer' it is. The present system is (in the view of some) too broad brush leading to some customers cross subsidising others.

The logic, according to Martin's post which started this thread, is

Arguing it means banks miss-sell more as they need cross sell to subsidise it.

Never mind the spello, it's much in line with what Andrew Bailey said when he started this debate.

I think it is outrageous that anybody should want to even try and find a "legal" reason for why banks have been mis-selling, and to suggest they may need to do so in future unless they levy additional charges. This sort of thing is otherwise known as blackmail.

It's not like banks aren't charging people quite steep amounts of money already, e.g. interest rates on loans and credit cards, overdraft charges and the like. In the same vein, they are in many cases (probably the vast majority of cases) paying absolutely paltry interest.

If the banks can prove to consumers that 1) all their costs are reasonable and justified and that 2) they are unable to cover their costs and make a small profit, that's a different matter. However, I have my very severe doubts they could prove that - unless they resort to one of their proven strengths - cheating.

dzug1

innovate wrote: »

The logic, according to Martin's post which started this thread, is


Never mind the spello, it's much in line with what Andrew Bailey said when he started this debate.



If the banks can prove to consumers that 1) all their costs are reasonable and justified and that 2) they are unable to cover their costs and make a small profit, that's a different matter. However, I have my very severe doubts they could prove that - unless they resort to one of their proven strengths - cheating.

That's the logic the banks are using - it isn't the only logic. On a more general level a government that believes (at least in its rhetoric) that deregulation and the free market are a good thing really must be led down this route. After all it is proposing that the banks should split off their investment activities (very profitable if done right) from their current banking activities (difficult to make much of a profit on, particularly if the scope of charges is regulated too much)

And I don't see that the banks have to prove anything to consumers

And no. I don't particularly like where this is leading either.

innovate

dzug1 wrote: »

And I don't see that the banks have to prove anything to consumers

There's always the OFT as the last resort if enough consumers want to have a given practice investigated for fairness.

Of course I agree, banks will try whatever they can to get away with making more and more money.

antrobus

innovate wrote: »

There's always the OFT as the last resort if enough consumers want to have a given practice investigated for fairness.

The OFT has been conducting a watching brief over the PCA market for some time - market study produced in 2008, progress updates since issued, latest March 2011 as far as I can remember.

innovate wrote: »

Of course I agree, banks will try whatever they can to get away with making more and more money.

Which would make them just like everybody else then.

kar999

As this is a thread meant to be about poll options there should be an option in the poll....

"Let the banks continue to make it up as they go along in a totally inconsistant way."

Just as Lloyds are currently doing. Free banking for some but not for others even though both groups maintain their accounts in an identical manner with the minimum balance and monthly deposit and earn no interest. This fee waiver option for pre 2005 accounts is still in their T&C's pre and post Oct2 changes... so it's pot luck. (Needless to say I've moved banks to one not charging.)

From the Guardian: Lloyds revealed that a "small" number of those packaged account holders, who have enjoyed the "fee waiver", will have to pay from 2 October.

http://www.guardian.co.uk/money/2012/aug/03/lloyds-platinum-account-loses-sparkle?newsfeed=true

https://forums.moneysavingexpert.com/discussion/4082579=

katejo

antrobus wrote: »

Yes and no.

When people talk about 'free banking' it has to be presumed they're talking about the UK model of 'free-if-in-credit' banking. Barclays was, I believe, the last to adopt 'free-if-in-credit' banking in 1989. Before that it was 'free-if-you-have-a-minum-balance-of-£500' - which was the standard model pre BSA 1986, and before that in the 1970s you were charged transaction fees but offset by some notional credit based on your average balance.

When I got my first job in 1980 I switched from Barclays to Williams & Glyns in order to avoid paying bank charges - 'free-if-in-credit' banking being a privilige only extended by Barclays to students, and I simply didn't have the £500 needed to qualify.

Was that a balance of £500 at all times of the month (not just when your salary came in)?

I don't want things to change. FD gives me a £250 fee free overdraft (reviewed each year) and i never abuse it/risk going near to the maximum. If they did get rid of it, I would make sure that I never went overdrawn. I have been banking since the early 80's and don't remember ever paying any charges (unless you count loss of interest on a current account.

Thrugelmir

innovate wrote: »

Of course I agree, banks will try whatever they can to get away with making more and more money.

Free current account banking is a major disincentive to new entrants in the retail banking sector. As the cost has to be recovered from somewhere and someone.

BobQ

The simple solution to this is to stop overdrafts completely. If you do not have the money in your account to pay the transaction it gets rejected and affects your credit history.

The only way you get an overdraft would be to apply for a loan and if granted to put the loan in your current account. Then banks granting these overdraft loans could charge a market rate for them.

This cross-subsidy would then not exist. The banks would only have current account customers in credit. They would soon decide on a charging model for this service. Those that had low balances and lots of transactions would be put on pay by transaction terms. Those with higher balances that used relatively few transactions would be on fixed fee accounts. You would choose which was best for you.

Of course those who cannot manage their financial affairs would still be charged higher charges through the interest on the loans.

The problem with this debate is that those who feel they are being overcharged seem to expect that can have free banking as well.

rmg1

antrobus wrote: »

I think you'll find that you did give them your 'express permission'. It'll be in that contract you signed when you opened the account.:)

Erm .... no it wasn't.
I've just changed banks (gone to Halifax) and I read their T&Cs very carefully.
Nowhere does it say that they can use my money to make a profit.
Nowhere does it say that they can loan my money to somebody else at a ridiculous rate of interest (whily paying me almost none of that mark-up).
Nowhere does it say that they can play the stock market with it.
All I've asked is that they hold the money on my behalf and let me get at it as and when I need to and to extract the amount I need.