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Bank deposits now more risky?

As banks drag out reclaiming of unlawful charges, many thousands of CCJs are being recorded against banks (including Nationwide). In many cases the judgements are not satisfied, and customers have to call in bailiffs to get their money. Surely, this should lower the banks’ credit ratings, as it would for any other company and of course individuals? This should make us more cautious about lending money to the banks, and mean we demand a higher interest rate to compensate for the worse credit rating. Some banks may be more trustworthy than others. Those that rely more heavily on penalty charges for revenue will suffer a bigger financial loss once charges are formally declared unlawful. Surely, we should know how many CCJs/defaults have been recorded before lending our money, like they credit check us.

It would seem that lending your money to the bank is safe only to the extent provided by the FSCS. Only by having £2000 per bank is your money '100% secure' as marketed by NS&I. But there is little information on how secure the scheme’s money is, or what actually happens when a bank gets into trouble. I would have thought because of regulation a bank won’t ever be penniless triggering the FSCS limits. Instead, it will just be a case of assets a bit lower than liabilities. But how is the money distributed? Are building society accounts less safe, being ‘share accounts’? Could there be a run on the bank? (Bringing to mind scenes from Mary Poppins.)

On the FSCS limits, if you have £40000 in savings and £5000 borrowing with an institution, do you get £31700 or £26700? Similarly for £4000 savings and £2000 borrowing, do you get 100% on the £2000, nothing @ 90%? What happens about mortgages and ISA allowances?


  • kingmonkeykingmonkey Forumite
    846 Posts
    38 billion profit thats not purely from charges
  • ManAtHomeManAtHome Forumite
    8.5K Posts
    Part of the Furniture Combo Breaker
    Good point though - would you do business with a billionaire with thousands of CCJs..?

    Anyone know if you can lose your banking or credit license due to CCJs?
  • stinchstinch Forumite
    5 Posts
    By making it more drawn out and difficult to reclaim fees the bank may put customers off doing it. They could end up with a bad credit rating yet pay out less money.
    On the other hand a bank that makes it easy to reclaim would have a spotless credit rating but end up paying out more money.
  • SeanWSeanW Forumite
    322 Posts
    You go overdrawn, unauthorised, you expect the bank to allow it, and refund any fee they levied for it, then you want them to increase the interest rate they pay on your money.

    Anything else the bank can do for you, a free mortgage perhaps, just give them it all back when you can?

    People wouldn't even have to think about reclaiming bank fees if they didn't treat a bank like a free source of endless money.

    What makes me laugh is people who are chasing the banks, but they don't bother with provident and other similar lenders and their 200% APRs. The plumber wants £50 to come to my house before he even does anything on a weekend, should I sent the bailiffs in, I think £12 is more reasonable.
  • ManAtHomeManAtHome Forumite
    8.5K Posts
    Part of the Furniture Combo Breaker
    The point about bank charges is that legally they are only allowed to cover their costs with penalty charges (eg the plumber couldn't charge you £2k for late payment).

    In many ways, would be much better if banks charged higher interest rates instead of sneaking in the extras (like mortgage lenders have tried recently with exit fees) - maybe more people would think twice about racking up overdrafts if they were paying provident rates..?
  • Compound_2Compound_2 Forumite
    292 Posts
    Part of the Furniture 100 Posts Combo Breaker
    SeanW wrote: »
    You go overdrawn, unauthorised, you expect the bank to allow it, and refund any fee they levied for it
    I certainly have no respect for those with unauthorized overdrafts. I don’t expect banks to allow it – they should return payments, billing you for the real cost. If they wish to allow an authorized overdraft, by all means charge a very high but lawful interest rate for the period, as ManAtHome describes.

    I DO have respect for the law of the land, unlike banks who show contempt of court and fail to comply with court orders. It could be argued that the Financial Services Compensation Scheme should already have come into force, because the failures to satisfy CCJs mean a bank is ‘in default’. Although stinch makes a good point, the fact is that reclaimers (like savers) are getting back their own money, which was unlawfully deducted from their accounts. So how do we know that banks won’t make it difficult for savers to get back their deposits, making them resort to courts and bailiffs? I think if a bank has a certain number of CCJs and/or failures to satisfy court orders, then it should have its deposit-taking licence revoked. Any other person or company with such a record wouldn’t be considered a safe credit risk, so I don’t see why banks should be treated differently. I’m surprised the FSA hasn’t stepped in. It is unacceptable that customers have to send in bailiffs to get their money.
  • dunstonhdunstonh Forumite
    113.3K Posts
    Part of the Furniture 10,000 Posts Name Dropper Combo Breaker
    Perhaps if the people now reclaiming the money had put as much effort into looking after their bank accounts in the first place, they wouldnt have to go through this.

    All that is going to happen is that the charges will be levied elsewhere. This almost certainly looks like the end of free banking. That annoys me as you hear that the OFT wants a clearer charging process that is fairer for everyone. Well, I never get charged under the current system, so how is paying charges in the future going to be fairer to the majority that never have unauthorised overdrafts?

    Of course, those with more in the bank will probably benefit more than those with little as the charges for bank accounts will probably be discounted based on balances. So those with little money to play with will just find themselves paying the same charges but called something else. Difference being that it will be every month instead of an occasional charge.

    No doubt some Govt funded budget option will appear for basic banking facilities to cater for those that dont want to pay charges. This will be paid for by taxpayers and allow more civil servants to be employed.
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • roswellroswell Forumite
    2.4K Posts
    ^^^ What he said.

    I havent been charged for being carefull with my money and also arranging a Authorised overdraft as a just in case ... as apposed to living on the limit of the overdraft, i think its fair that they charge a large fee ... it should be £100, after all its theft just like taking somethign from a shop with out paying for it, the people claiming back charges have spent money that isnt theres ... and then they want compensation for it .. what a great place.
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  • Compound_2Compound_2 Forumite
    292 Posts
    Part of the Furniture 100 Posts Combo Breaker
    I think we’re digressing into repetition of the debate over charging. The point is, now that the CCJs have happened and bailiffs have been sent in, the banks’ credit ratings have fallen. I’m sure many persons with CCJs can claim mitigating circumstances. But that doesn’t repair your credit rating or alter the fact that the CCJs happened. People with CCJs are stigmatized in credit scoring and I don’t see why banks should be treated any differently.
  • jamesdjamesd Forumite
    25.8K Posts
    Part of the Furniture 10,000 Posts Name Dropper
    dunstonh wrote: »
    how is paying charges in the future going to be fairer to the majority that never have unauthorised overdrafts?

    Economists traditionally regard elimination of subsidies as a good thing. In this case it's eliminating the subsidy by those who pay fees to those who don't.

    You're trying to have it both ways: critising those who paid fees for mismanagement while regretting the loss of the subsidy of your own banking.

    The banks will presumably become more aggressive about cross-sales to recover any lost profit.
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