I can't believe banks can get away with this...

davidcampbell

Last month alone I was charged 60 pounds for clearing transactons while overdrawn. I had to explain to the company after a lengthy time in a phone queue that I had over 1500 pounds in my account when they claimed I was overdrawn. I stuck to my guns though and after another lengthy period on hold I got my money back.

our charge system is completely automated. if you got charged you were overdrawn. you may have had £1500 but was it cleared and available funds?

DC

Sofa_Sogood

Midget_Karen wrote:

You do know before you pay in a cheque that it will take a couple of days before it will clear, and therefore a few days before the money is "yours" and you can use it.

It might not be relevant, but my post referred to cheques we received in a business account that bounced on us. We foolishly thought they were ok, and subsequently paid our bills thinking these would clear ok.

But it was a few years ago. When Thatcher's lot was in power and it all went 'wrong' (which I'll remember tomorrow when I vote) and to my knowledge, there wasn't any internet banking then. Not that I understand it now

However, I still hate Lloyds .... with a vengeance

Or any bank that charges exhorbitant fees when it's already clear that people are in trouble.

j_dlaw

davidcampbell wrote:

our charge system is completely automated. if you got charged you were overdrawn. you may have had £1500 but was it cleared and available funds?

DC

Yep, the money had been cleared for weeks. That's what makes it such a bad mistake. Remember automated systems are programmed by humans and can also go wrong. Maybe a person doing it manually would have hopefully double checked before applying a charge/fine.

dougk_2

j_dlaw,

Correct computers can only do what they are told to do! They can't think for themselves (yet!). Errors will happen but probably less often than a human. Unless all human processes are double checked (or triple checked) by another individual which would have huge financial implications for banks , human error will happen. Just think how many more transactions per day are happening as opposed to 20 years ago.

Milky_Mocha

Hello Mippy

Sorry to hear about your plight. Financial budgeting and management is always easier the more money you have so I can understand how difficult it must be for you if you are on a "modest salary".

Now I wouldn't say you were not wrong in going overdrawn especially as it was not the first time you were hit with these charges. However I believe that £80 of charges for being overdrawn for one day is rather excessive and unfair. My bank charges unauthorised o/d's based on the number of days you are overdrawn and not number of transactions. If this rule had been applied to you you might have had only £20 in charges (I'm assuming you were only overdrawn for one day?) Anyway t's and c's vary from bank to bank.

I realise you have tried to contact them by phone and in the branch but have you tried the good old fashioned method - letter? I find it works wonders and you can direct your enquiry to the department manager or a complaints department. Depending on how you word it you could have your charges waived or reduced even when you were in the wrong. (Works for me with mobile phone companies, parking fines, etc). It might not always work but its worth a shot. Your letter could go something like this:

Dear Sir or Ma'am

I was deeply disappointed to find that I have been charged £80 for going overdrawn on the xx/xx/2005. I realise that I should be more responsible with my account in future and apologise for this occurence. However I also believe that the charge is disproportionate to the offence and such a hefty charge is rather unfair.

I now appeal to you to please waive or reduce this charge and provide me with a buffer of at least £50 if possible to meet my needs. I have been a customer of yours for x years and in spite of several instances of errors on your part in the past listed below I have remained loyal to Abbey.

1. error a
2. error b
3. error c

I would appreciate a quick reply from you. In the event that you do nothing to alleviate this problem I would take the opportunity to thank you for your service over the past x years, albeit a service below expectations and join an alternative bank. It is my fervent hope however that you find in my favour and do what is fair.

Thank you in advance for your response

Kind regards
Mippy!

TimC

dougk wrote:

I know that it is hard for people with little money , but you should always try and retain a buffer ABOVE the £0 mark. This may mean going without things for a week or too and then being really hard on yourself not to take any money out of your account if you are below this buffer (say £50). This way you can avoid unexpected charges if something goes slightly wrong.

Good advice ~ and don't forget to increase that buffer as your life changes. For instance if you change to a joint account, then there are two of you who could potentially overdraw the account.

Once I started to manage my debts created through my own foolishness as an apprentice (a long time ago now), I started with exactly that a £50 minimum balance and we had to as my wife worked for a bank and we were absolutely forbidden from going overdrawn. Boy was she nervous having me on her account with my track record!!

Turning_into_scrooge

I use a buffer of £80 on my MS Money. I've customised it to warn me if i go below £80 in my account so i know to slow down as it usually appears near the end of the monthand as I do my accounts daily i can't miss it. I class that as my emergency money

cgnao

To all those who have been charged unfair and excessive bank charges, here is an illuminating article that you can find at
http://www.bankchargeshell.co.uk/charges.html, together with examples of how to fight back legally.

Liquidated damages and unenforceable penalties

These charges are not charges for providing services under the contract; they are charges imposed because the customer has breached the terms of the contract. Under contract law, when either party to a contract breaks a term of the contract, the other party is entitled to recover damages for this breach.

They could sue the other party in the courts to recover the damages. As this would not be very sensible for every minor breach of a contract, the law allows parties to a contract to agree in advance what damages would be payable if either party breaks a term of the contract. If the sum payable appears to the courts to be a genuine pre-estimate of the damages that are likely to be incurred, the courts will accept that this sum is what is called liquidated damages and the offending party will be obliged to pay this sum.

However, if the sum specified in the contract is not a genuine pre-estimate of the loss that will be incurred but is excessive and is inserted in terrorem (from Latin, as a warning or deterrent, basically to frighten the other party) the courts call this a “penalty” and will not enforce it.

Therefore, in the case of financial institutions and their customers, the charges made by them because the customer has broken their overdraft limit or not made a payment on time should not exceed the damages that the bank has suffered because of the customer’s breach of contract. If the sum payable is excessive, it will become a penalty and will be unenforceable by the courts.

The damages that the bank suffers if the customer’s overdraft limit has been exceeded are:

a) the customer now owes the bank more than he or she previously did, and, obviously the bank is entitled to recover this amount, but they will do so in due course anyway plus interest (unless the customer defaults all together)

plus:

b) the costs incurred in notifying the customer of the incident. However - does it really cost a bank £20 to send a computer generated, automated letter to the customer to notify them that the account has breached the overdraft limit?

The damages that the bank suffers if they have to return a cheque or direct debit are merely the cost of sending the cheque back to the other bank or notifying them that the direct debit cannot be paid, plus the cost of notifying the offending customer. Does it really cost £30-35 to do these things when these processes are virtually all automated and computer-generated, generally without any human intervention?

It would seem to be very difficult for any bank to justify their charges as being liquidated damages and, as far as we know, there have been no cases where a bank has been prepared to go to court to defend their charges.

MarkyMarkD

I don't accept any of that legal argument.

A bank can argue that it is allowing you the facility to make payments which are in excess of an agreed overdraft limit, under the terms of the account, at an agreed charge of £20 or £35 or whatever.

A bank can argue that it is allowing you the facility to be overdrawn in excess of an agreed overdraft limit, under the terms of the account, at an agreed interest rate which is 29% APR or whatever.

These are NOT penalties or liquidated damages, and therefore the legal argument fails.

They are pre-defined charges, which are agreed with the customer in the terms and conditions of the account, for the services of writing cheques/making debit card payments without having the money or the authorised overdraft limit to do so.

"As far as we know, there have been no cases where a bank has been prepared to go to court to defend their charges" means nothing. There's no reason why such cases would necessarily be available to all and sundry.

The whole concept that any charges made by a bank should be equal to their costs is complete poppycock. Is there meant to be some logic in the fact that customers who operate their accounts in a "proper" way can be charged on a cost+profit basis, but those who operate their accounts in an "improper" way can only be charged on a pure cost basis? I don't think so.

cgnao

MarkyMarkD wrote:

I don't accept any of that legal argument.

A bank can argue that it is allowing you the facility to make payments which are in excess of an agreed overdraft limit, under the terms of the account, at an agreed charge of £20 or £35 or whatever.

A bank can argue that it is allowing you the facility to be overdrawn in excess of an agreed overdraft limit, under the terms of the account, at an agreed interest rate which is 29% APR or whatever.

These are NOT penalties or liquidated damages, and therefore the legal argument fails.

They are pre-defined charges, which are agreed with the customer in the terms and conditions of the account, for the services of writing cheques/making debit card payments without having the money or the authorised overdraft limit to do so.

"As far as we know, there have been no cases where a bank has been prepared to go to court to defend their charges" means nothing. There's no reason why such cases would necessarily be available to all and sundry.

The whole concept that any charges made by a bank should be equal to their costs is complete poppycock. Is there meant to be some logic in the fact that customers who operate their accounts in a "proper" way can be charged on a cost+profit basis, but those who operate their accounts in an "improper" way can only be charged on a pure cost basis? I don't think so.

Well, you might not accept it, however the courts have done so:

Press Release
14/02/2005

“CHALLENGE UNFAIR BANK CHARGES” SAYS MP AFTER LAURA v. GOLIATH TEST CASE

The Liberal Democrat MP for the West Cornwall and Isles of Scilly Constituency of St Ives, Andrew George, heralded news of the outcome of a recent County Court case on behalf of one of his constituents, Laura Saunders (of Goldsithney) which resulted in her victory against Yorkshire Bank plc in respect of bank charges amounting to £922 during 2004. Following what could be a very significant test case, Mr George believes that many banks should review their treatment of low-income bank account holders and has referred the case to the Secretary of State for the Department of Trade and Industry - Rt. Hon Patricia Hewitt MP - who has been encouraging pensioners and claimants to open up bank accounts to receive their benefit payments, rather than to receive them over the Post Office counter.

The case of Laura Saunders is set out below (see notes ). Ms Saunders is one of millions of people who suffer at the hands of banks and credit card companies that make much of their profits from variable charges which vulnerable bank account members can do little about. A number of large high street banks have raised fees for bounced cheques and unauthorised overdrafts and have increased the amount charged for customers for unpaid cheques and standing orders.

The consumer body Which? has called on all banks to follow the lead of Alliance and Leicester and the HSBC, which now charge the same rate for unauthorised overdrafts as they do for authorised ones (A&L charges 6.9% and HSBC 14.8%). In the case of Laura Saunders, she claimed £922 in the County Court, arguing that charges levied by the bank on her were an unlawful penalty.

Commenting on the case, Mr George said, “The case of Laura Saunders is typical of many constituents who have contacted me complaining about the penalties they face, often with little prior notification of the change in the rules by which their account will be managed. Quite frankly, I believe that many lending institutions get away with blue murder in their treatment of low-income account holders. I hope that this case will be a salutary lesson to them all.

“I also hope that the Government will sit up and take notice. They have been trying to bribe and cajole pensioners and benefit recipients into shifting the way they receive payments; from the Post Office counter to Automated Credit Transfer in to newly opened bank accounts. Many of those who are opening these bank accounts may find themselves in the same kind of difficulty as Laura Saunders found herself and Ministers should be aware that this could place account holders in difficulty.

“As far as contract law is concerned, this test case clearly demonstrates that penalty charges should not be enforceable if those charges are disproportionate. This is good news for ordinary people on low incomes. Laura took on Goliath and won,” said Mr George.