Overdraft fees

Linsomer

I am sure I am not alone but trapped in excessive overdraft fees from which I have no way out.  Got large overdraft when in well paid job, now due to traumatic circumstances, pensioner in social housing on benefits and no private pension.    I sent numerous emails to HSBC, with whom I've been for over 50 years, saying I was managing now but the increased rate would cause me great hardship.   A string of generic responses telling me to get a bank loan which (a) I wouldnt qualify for and (b) would cost me more per month which I cant afford anyway.     I contacted the Ombudsman who, whilst sympathetic, said there was nothing they could do as banks were well within their rights to charge whatever interest rate they want.    Class action suit with the FCA would take years.    So, no way out.      Eat or heat (oil!!) is now eat or not eat.   How can banks justify 39.9% interest when bank rate is only 0.75%.   Shame Ombudsman is so weak and ineffective

mwarby

It sounds like insolvency may be an option for you. Depending on amount of debt you may be suitable for a DRO, if not bankruptcy wouldn't be too bad as you rent and only income is benefits (which can't be taken).

born_again

Linsomer said:

   How can banks justify 39.9% interest when bank rate is only 0.75%.   Shame Ombudsman is so weak and ineffective

But it is this very ombudsman that wanted the change in how overdrafts were charged.

Thrugelmir

Seek advice for your situation. 
https://www.gov.uk/national-debtline

John_

It’s not really clear what help you are looking for. Overdrafts are for short-term cash flow issues, not long-term borrowing, so it sounds as though you’ve been using yours in the wrong way.
Have you no savings that you can use to clear it, or anything that you could sell?
Are you able to work?

Willing2Learn

Linsomer said:

I am sure I am not alone but trapped in excessive overdraft fees from which I have no way out.  Got large overdraft when in well paid job, now due to traumatic circumstances, pensioner in social housing on benefits and no private pension.    I sent numerous emails to HSBC, with whom I've been for over 50 years, saying I was managing now but the increased rate would cause me great hardship.   A string of generic responses telling me to get a bank loan which (a) I wouldnt qualify for and (b) would cost me more per month which I cant afford anyway.     I contacted the Ombudsman who, whilst sympathetic, said there was nothing they could do as banks were well within their rights to charge whatever interest rate they want.    Class action suit with the FCA would take years.    So, no way out.      Eat or heat (oil!!) is now eat or not eat.   How can banks justify 39.9% interest when bank rate is only 0.75%.   Shame Ombudsman is so weak and ineffective

Hi Linsomer and welcome to the forum 

Since you are currently in financial difficulty, I recommend you start a new thread in the Debt-Free Wannabe board, posting up your completed Statement of Affairs (SOA).  That way you will get advice, support and guidance to help you on your debt-busting journey 

With regard to your overdraft, I suggest you consider trying to get a refund of your charges.  You may be eligible to reclaim charges if:

• You’re in real financial hardship. For example, if you’re struggling to buy necessities and pay bills, or you’ve lost your job.
• The charges are unfair compared to what you did. For example, if you went overdrawn £1 and were charged £35.
• You’re stuck in a spiral of charges. This might happen if the charges keep putting you into the red, and the overdraft keeps costing you more in charges.

Have a read of the MSE article linked below:
https://www.moneysavingexpert.com/reclaim/bank-charges/

Ergates

Linsomer said:

How can banks justify 39.9% interest when bank rate is only 0.75%.

Because overdrafts aren't meant to be used for long-term borrowing, and because nobody is willing to pay for retail banking.

878robin

Overdraft fees are enforced by banks as one way for them to make a lot of money. Instead of struggling to pay bills throughout the month because of the lack of personal liquidity. If you get a bill in the third week of the month that needs paying before payday, wouldn't it be better to get access to the money you've already earned in the month instead of turning to bad credit?

deadendwaterfall

878robin said:

Overdraft fees are enforced by banks as one way for them to make a lot of money. Instead of struggling to pay bills throughout the month because of the lack of personal liquidity. If you get a bill in the third week of the month that needs paying before payday, wouldn't it be better to get access to the money you've already earned in the month instead of turning to bad credit?

I wonder what the banks would do if very few people ever used any kind of overdraft? 

Ergates

deadendwaterfall said:

I wonder what the banks would do if very few people ever used any kind of overdraft? 

As the FCA closes down or restricts the bank's traditional sources of income we are approaching the point where banks will start charging for accounts - as happens in other countries already.
Whilst this would, obviously, suck, I can't honestly say it would be a bad thing.  Under the "traditional" model, a lot of the income came from interest charges, overdraft charges, bounced payment charges etc - this all meant that most of the income was coming from those people least able to afford it (i.e. people already in financial difficulties).  Which doesn't really seem fair - those of us that are financially comfortable having our free banking services paid for by people who are not so comfortable.

born_again

The overdraft changes that the FCA have brought in are in some ways wrong. The people that are getting away paying less are the very people who should be paying more. They abuse the system by borrowing more than they had agreed to. Thus they should pay for the privilege.
Yes anyone spending a lot of time in a overdraft is going to have to pay for it. That is only fair like any other borrowing. So long as it is agreed between parties. Abuse the agreement and deserve to pay for it.
Still at least now banks are taking the position that anything taking you over your agreed limit is going to be declined. So while the banks won't make anything out of it. Other companies will where you are talking declined DD's and the resultant charges they make.
So all's fair in abuse of the systems.
I do think that the FCA will take a stand later this year on the interest rates on O/D being as high as they are. If they get wnough complaints. But they had the option in the 1st place to limit the amounts charged. But left it to the banks to decide.
So in reality the fault for high rates lays squarely at the FCA's door.