MSE News: Bank charges campaign saves consumers billions

Former_MSE_Helen

"Bank customers have saved up to £928 million a year from the fall in overdraft charges between 2007 and 2011..."

Read the full story:

Bank charges campaign saves consumers billions


Also see:

Switching bank accounts 'must be made easier'

Hanky_Panky

Helen, you may wish to trumpet your 'success' however your atrticle is very misleading.

As was pointed out to MSE when you started this ill advised campaign all that has happened is the fees for 'unauthorised' overdarfts have been reduced whilst those of us that manage our finances properly, and are therefore very MSE and only occasionally dip into our overdrafts, are subsidising those that mismanage their money.

A poor result for the vast majority if you ask me.

Also - 'Money Saving Expert news editor Guy Anker says: "Our bank charges reclaiming campaign not only helped people get hundreds of millions of pounds back in unfair charges, but it has forced banks to lower these sometimes hideous fees for the long term.'

No - they weren't unfair.

Alpine_Star

Hanky_Panky wrote: »

No - they weren't unfair.

They weren't unfair?

Says who?

Hanky_Panky

Never proved in court.

KTF

How difficult is the switching process anyway when all the banks offer the service as part of the account opening process?

For what its worth I 'switched' from Nationwide to Santander using Santanders process and everything moved over within two weeks. It was actually complete before the 'this is what stage we are at in the process' letters arrived.

VT82

Agreed. I reckon switching is easier than we have any real right to expect.

Banks must send out loads of letters to get all the DD's switched, will switch your standing orders for you, will do the work getting your wages switched, and tend to give you an interest free overdraft for well longer than is needed to sort it all out.

If we were to have to do all this ourself, then it would be a nightmare. But there's no reason why we shouldn't have to do it ourselves. Maybe having portable current accounts would help, but there's no qualms from me on the progress that's been made so far.

innovate

I used a couple of switcher services and I wasn't impressed - - mainly by the DD takers, though, as opposed to by the banks.

American Express refused to accept First Direct's request to switch my Direct Debit from The OneAccount.

My local Council refused to accept two separate requests from two separate banks (not at the same time, obviously) for changing my direct debit for the council tax. They also wouldn't take my own instructions to change my existing DD on the phone, or via email. It had to be on their form, signed by me, and they insisted on the original. The only saving grace was that I could download their form from their website.

I am sure these are just examples of organisations who are not ready to accept swift changes to DDs. It seems quite unbelievable that outfits like American Express and Councils are unable to accept requests from banks as genuine requests. Or, to put it in another way: that they aren't being fined for not actioning such requests within one business day.

So if the FSA (and MSE) think they just need to put pressure on the banks and switching account (by asking your bank to do it for you) will then be a doddle, they are wildly mistaken.


Having said all this - - -- switching accounts is actually pretty much a doddle already. You just need to want to switch from one bank to another, be prepared to do it yourself, and you can do it. Right here, right now. Just do it all yourself, and it's all over and done with. There is no need for waiting for banks to spend money on introducing some switching procedure to fit all (and which then probably doesn't fit most of us).

The proposals for retaining account numbers sound great on the face of it but in effect, they are akin to taking out all the retaining walls in your house so you can put up some new wallpaper. Sort codes and account numbers are part of the fundamental fabric of our banking system. Messing about with it could create confusion of babylonic proportions. Heck, in our current systems, Faster Payments still seems to be able to send payments to non-existent accounts, and that's before anyone has messed with what is quite an orderly system of sort codes and account numbers!

Sure, it would be nice if switching accounts would be even easier than it is already, but there are a whole lot of massively more important things banks should improve for their customers. Such as

• making it truly easy to see what interest rate you are paying for your loan, or what interest you get for your savings.
• reliably alerting you of any impending charges for any overdrafts
• notifying you in a timely and reliable manner of an impending interest rate drop on your savings, and showing you how you can get the best interest rate in the industry (as opposed to dropping you to the worst rate the existing bank can possibly offer)
• assuring payments are not being made to non-existing accounts
• and so the list continues.

Of course, failure to meet the above should be accompanied by hefty, and automatic, fines for the banks. This sort of thing I would feel worth campaigning for, because it would be more than a sticking plaster on a broken bone.

pmduk

I've always preferred to transfer all of the DDs myself when moving banks. I suspect that says more about my own desire to remain in control than banks' inefficiency

tifo

Hanky_Panky wrote: »

all that has happened is the fees for 'unauthorised' overdarfts have been reduced whilst those of us that manage our finances properly, and are therefore very MSE and only occasionally dip into our overdrafts, are subsidising those that mismanage their money.

No you're not. It's actually the opposite.

As you will know from the test case judgment of Nov 2009, its actually shown that overdraft fees keep accounts free. So those paying through the nose for a service they don't receive are keeping your well managed account free.

Milarky

tifo wrote: »

No you're not. It's actually the opposite.

As you will know from the test case judgment of Nov 2009, its actually shown that overdraft fees keep accounts free. So those paying through the nose for a service they don't receive are keeping your well managed account free.

Now I'm confused. If accurate, is that something MSE should either a) 'celebrate' or b) seek to take 'credit' for?

*MF*

On the day the Supreme Court gave their ruling, Adair Turner and Hector Sants appeared before the Treasury Select Committee - these are extracts from Adair Turner:

" ... I think that it is clearly the case that the argument about whether these charges in the past can be deemed to be unfair, which is probably the basis of most of the complaints that have been brought forward, has been definitively resolved by the Supreme Court ..."

" ... There was a clear legal decision, you have to remember, that the banks were justified in doing this."

Source: http://www.publications.parliament.uk/pa/cm201011/cmselect/cmtreasy/uc612-ii/uc61202.htm

So we have the head of the FSA, with his CEO in attendance, and the TSC accepting his statements (that is an example of where I have to give you more source evidence) - Adair Turner says ...the matter of fairness or unfairness was definitely ruled on by the Supreme Court.

Was it? What did the SC decide and rule on? Use these extracts from the SC Press Release that day:

" ... This appeal involved a relatively narrow issue. The Supreme Court had to decide not whether the banks’ charges for unauthorised overdrafts were fair but whether the OFT could launch an investigation into whether they were fair."

" ... Lord Walker made clear that the scope of the appeal was limited the court did not have the task of deciding whether or not the system of charging current account customers was fair, but whether the OFT could challenge the charges as being excessive in relation to the services supplied in exchange (Paragraph 3)."

Source: http://www.supremecourt.gov.uk/decided-cases/docs/UKSC_2009_0070_PressSummary.pdf

If, like me, you recognise the stark difference - we have our start, let's look at what else Adair Turner said to the TSC:

" ....Lord Turner: This is an issue that we’ve discussed at great length, because we did discuss at great length the issue of the unauthorised overdraft charges where, you are absolutely right, the process was, you have a core product that might not make money out of the person who doesn’t go into overdraft, but the moment they go into overdraft they get hit by unauthorised overdraft charges. There was a clear legal decision, you have to remember, that the banks were justified in doing this. Even before that, this was more an issue for the OFT than us, because you have to remember we do not regulate at the moment consumer credit, and overdrafts count as consumer credit. But the answer is, when and if all that is tidied up, yes, I do think the appropriate regulatory authority should be directly looking at both the transparency and indeed the level of unauthorised overdraft charges. That should be part of our regulatory machinery."

Source: http://www.publications.parliament.uk/pa/cm201011/cmselect/cmtreasy/uc612-ii/uc61202.htm

Now ask, perhaps the first of many questions - if the OFT deal with credit - who is the regulator for all the bank accounts that offer no credit - ie., basic bank accounts. Then think of how many bank charges may have been levied against such accounts and where was the regulator??? (Again - in our later discussions - I need to give you more evidence of how the FSA directly address unfair charges - and it is an eye-opener - and it would apply to basic bank accounts.).

Importantly for our later discussions - you will also find the question of "free banking" already on the agenda - see this extract - also from the above link to the TSC.

" ...Lord Turner: I think it probably is the case that free if in credit banking does create a bit of a barrier to new entrants, because it’s important to realise it is not just free if in credit, the current account in itself is probably for many customers loss making or marginally profitable. It is essentially a loss leader. It is just a classic loss leader, or at least low-return leader, which banks provide in order to get hold of a relationship on which they can then sell other products. There are two problems that follow from that. One is that because of that there is a desire for them to sell other products, including sometimes products that are not appropriate, and that is where we get some of the problems from aggressive selling, because they’re trying to make up for the low profitability of the core product. It is also the case that a loss leader product, almost by definition, makes it more difficult for new entrants to come in, because they can’t make profit just out of the core product. They have to immediately be able to cross-sell other products as well. The structure is probably something that tends to make it more difficult for new entrants to come into the market. There are other important barriers to new entrants, however, which I notice the OFT have also set out in their recent report."

So (with some added facts you need) - I can argue a case over basic bank account charges, but we also need to address the charges applied to overdrafts etc - what the OFT were attempting to do, and where the FSA said they had no jurisdiction - to do that we need to look at something that happened later - the Judicial Review over PPI - which has not been appealed - and it reveals two very interesting facts.

Start with these extracts (the source document is at the foot of these extracts) - and the FSA Principle that applies to "Treating Customers Fairly".

" ... An important consequence of contravention of a rule is provided for in s150 as follows:

"150. – Actions for damages.

(1) A contravention by an authorised person of a rule is actionable at the suit of a private person who suffers loss as a result of the contravention, subject

to the defences and other incidents applying to actions for breach of statutory duty.

(2) If rules so provide, subsection (1) does not apply to contravention of a specified provision of those rules."

S150(2) is significant in the case since the Principles are FSA rules but the FSA has provided that s150(1) does not apply to them. Other consequences which apply to contraventions of the rules, including Principles, are public censure under s205, and financial penalties under s206. Those consequences are appealable to the Upper Tier Tribunal. The FSA may also seek from the court an injunction to prevent repetition of a contravention, s380, or a restitution order where someone has profited from a contravention or another has suffered loss in consequence; ss382 and 384."

So we have an FSA rule to cater for the losses of individuals - but - the FSA have deliberately excluded the right of legal action by anyone if they have been treated unfairly!!! Yep, that is what the regulator did - it removed the right of all UK citizens to go to court if they have been treated unfairly - grossly or otherwise!!! ... Need more proof?

This extract:

" ...PRIN R3.4.4 contains the limitation permitted by s150(2), and states that:

"A contravention of the rules in PRIN does not give rise to a right of action by a private person under section 150 of the Act (and each of those rules is specified under s 150(2) of the Act as a provision giving rise to no such right of action)."

But - and it is crucial - what the ruling from the Judicial Review firmly established was that the FOS were in breach of their statutory duties if they reached their decisions on that basis (the basis used by the FSA) - that is why we have had the PPI compensation - not because of the FSA, but because of the FOS' statutory duties and that Judicial Review, and its decision was not appealed by the Banks.

Here are a few of the important relevant extracts from that JR:

" ... 76: All that the FSA decision under s150(2) does is to prevent a cause of action for breach of statutory duty arising in respect of the Principles; that is the only limitation on their role. That fact cannot make them irrelevant to the Ombudsman's duty to reach a decision as to what is fair and reasonable in all the circumstances of the case. Nor is there a justification for treating Principles, which cannot give rise to legal action, differently from those other relevant materials which by their nature cannot do so: regulators' guidance, codes of practice and good industry practice.

77: Indeed, it is my view that it would be a breach of statutory duty for the Ombudsman to reach a view on a case without taking the Principles into account in

deciding what would be fair and reasonable and what redress to afford. Even if no Principles had been produced by the FSA, the FOS would find it hard to fulfil its particular statutory duty without having regard to the sort of high level principles which find expression in the Principles, whoever formulated them. They are of the essence of what is fair and reasonable, subject to the argument about their relationship to specific rules."

Source: http://www.bailii.org/ew/cases/EWHC/Admin/2011/999.html

*****************************

Whether bank charges were fair or unfair - was, contrary to Lord Turner, a question never answered by the Supreme Court.

I hope the above extracts demonstrate that there is an answer - but it has never surfaced, or perhaps it has never been allowed to surface?

A shed load of money is involved - and the reputations of many important individuals.