A Bankers View, Open Letter To Martin Lewis And His Followers On Bank Charges.

Smasher

robnye wrote: »

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the issue about whether bank charges isnt just a case of whether they are lawful or not, surely the biggest issue is whether they are justfied in being as high as they are......

Wrong, it is entirely about whether they are lawful or not. As probably millions of people have already said by now, if the charge is more than their costs, it is a penalty, and therefore it is unlawful .. period.

taytanya

ok so here is my 2 cents worth , i am a single mum of 3 , and for various reasons out of my control i do not work , so my only source of income is from benefits , now i have no problem with charges being made to my account because ive had a "bad " budgeting week , but heck the amount cripples me

so here are a few figures for you !

1- single parent
3- young children
216.23 p/w total income
1 refused D/D
39 pound charge for refusing it
29 pound charge per day if the initial charge makes you over drawn
2 days being over drawn
97 pound in total charges
119.23 left to cope that week

if the charge was a one off , of about £5 - £10 or even £15 im sure myself and others would find it more reasonable and would be able to cope better if they did have a "bad" week.

charging is acceptable , but its the amounts the banks charge that isnt , that is what in my opinion is "unlawful"

Tim_L

Actually if the charges were lower they probably would be lawful. The legal system is fair really, where one party to an agreement loses money or is subject to costs because of the default of another party, it's perfectly reasonable for them to expect the other to pay.

When all this started there were quite a lot of suggestions from the banks that in fact these charges reflected the actual cost of specific infrastructure in terms of staff and machinery costs. This is similar to the claim that every transgression creates a credit check, which Martin referenced earlier (or 'credit cheque' as he put it, took me a while to read it phonetically and work that out). Both are pure nonsense, and you won't find many banks now denying that this measure was a profit stream.

Let's restate that to be clear. It's not covering costs. It's not a deterrent to the financially naive. It's a profit stream. Banks ACTUALLY WANT people to incur these charges. There is no moral or educational element.

I'm pretty careful with money, but I have complex financial affairs and very large transactions going in and out of several bank accounts into bookmakers which are made at great speed without time for a lot of checking of balances. Inevitably every now and again I make a mistake, and I'm staggered by the way charges are applied. A&L are the absolute worst in my book, applying a fee for an attempt to go overdrawn, then a fee for every transaction while overdrawn including the first, so one transaction costs you double. Debits are applied before credits. Most of my accounts are set up specifically not to have overdrafts, and to be honest I'd be delighted if a debit card transaction taking me overdrawn could just be rejected - a "consideration fee" is a service I don't actually want. In fact that would be a great solution to the problem of the financially naive as the OP saw it: just don't allow unauthorised overdrafts at all. So why do the banks not do this?

Because it doesn't make them money.

smitchy73

here, here.

Tootsie_Roll

Tim_L wrote: »

In fact this is complete nonsense. Banks were profitable before this idea came about, at which time current accounts were free of charge. Overdrafts were either pre agreed, in which case interest was payable, or accidentally commenced or exceeded, in which case you would get a notification and told to correct the situation. While you did, interest was charged and further transactions would be blocked.

So what we have are thieves pretending to be guardians of public morals by stealing from the poor. And so silvertongued have they become that great tranches of the public are believing them. If the poor dare to ask for their own money back, they are vilified as belonging to the great new compensation culture.

Some inaccuracies in your post and Martin's as well (shock horror !).

Bank accounts have attracted bounced payment charges for many, many years (certainly late 70's/early 80's) even before free bank accounts were offered. Prior to 'free' banking you paid per transaction which potentially could mount up. Following the launch of free banking banks changed their revenue stream to reward those who managed their account properly and penalise (yes penalise) those who didn't. Many of you think that is grossly unfair and I don't completely disagree with you as their are always genuine hardship cases that don't deserve that treatment. However the assumption that the majority of cases don't deserve penalising is just wrong -ask anyone who has worked in the same environment as me and the OP and we can tell you that the MAJORITY just take the p1ss.

The comment about compensation culture is entirely relevant - no-one seems to want to take responsibility for their actions anymore when they can blame someone else and get support from sites like this one in the process.

I look forward to the ruling next year - I have a feeling there are going to be a lot of very disappointed people on here.

Smasher

Tootsie_Roll wrote: »

Many of you think that is grossly unfair and I don't completely disagree with you as their are always genuine hardship cases that don't deserve that treatment. However the assumption that the majority of cases don't deserve penalising is just wrong -ask anyone who has worked in the same environment as me and the OP and we can tell you that the MAJORITY just take the p1ss.

The comment about compensation culture is entirely relevant - no-one seems to want to take responsibility for their actions anymore when they can blame someone else and get support from sites like this one in the process.

I look forward to the ruling next year - I have a feeling there are going to be a lot of very disappointed people on here.

Penalty charges are against the law. It is not for a bank to impose punishment, they are not the police!
Trust me, if a ruling went in favour of the banks next year, you will be as disappointed as anyone else. Wait until you get your first bank statement or phone bill after such a ruling to find that a few new services have been added to your account and your bill is 5X more than usual. You wouldn't be able to contest it if there is a high court ruling that a company can legally force new "services" on their customers without negotiation..

Tim_L

Bit of a rewriting of history there, Tootsie. Free banking was introduced because traditional banks were put under competitive pressure to remove charging. In fact this was used as a sop for the closing of branches and the removal of genuinely personal banking. When I went overdrawn in the early 1980s I received a personal letter from my bank manager informing me of the fact and explaining the interest rates I would have to pay.

NO-ONE is objecting to paying actual costs and the cost of the money. The objection is to banks making punitive charges, which they are not legally entitled to do, and using them as a profit stream. It'd be bad enough if this wasn't mostly coming from the pockets of those least able to pay and causing a snowball effect.

No bank in history has ever decided to philanthropically 'reward its customers' by taking money from its bottom line and doling it out to those showing 'good behaviour'. They try to maximise profits, and they will not remove or implement a charge unless it maximises profits. It's laughably naive to claim otherwise. I repeat: Banks want people to pay these charges. Given a choice between 'good' customers who never go overdrawn, and 'bad' customers who float around and occasionally transgress an arbitrary margin, they would take the 'bad'.

It is not compensation to ask for your own money back when it's been wrongfully taken. No-one is suggesting the banks should pay punitive damages. Banks are not above the law, they are not guardians of sensible financial management (fortunately, as their antics with sub prime lending demonstrate). And they would probably have got away with these charges had they not been so ridiculously disproportionate. It is greed that caught them out, plain and simple.

If you have the level of contempt for your customers that your statements and intemperate language suggest, then you're working in the wrong industry, frankly. Or maybe that's just endemic in banking?

Tootsie_Roll

Tim_L wrote: »

NO-ONE is objecting to paying actual costs and the cost of the money. The objection is to banks making punitive charges, which they are not legally entitled to do, and using them as a profit stream. It'd be bad enough if this wasn't mostly coming from the pockets of those least able to pay and causing a snowball effect.

It is not compensation to ask for your own money back when it's been wrongfully taken.

You have defeated your own argument. It is mistakenly assumed that banks make money from offering currect accounts - they don't. Free current accounts are a loss leader designed purely to attract customers in the front door. If banks were to scrap charging they would be forced to charge by other means to lessen their losses still further- bringing back the old regime of charging again. I completely agree that the fees charged do not represent the actual charges for bounced dd's etc however overall banks are still losing money. You can extrapolate the argument still further and state that if we all ran accounts properly and no-one was charged how would the banks recoup their losses then ? I don't have the answer to this and it is a redundant argument as the chances of that happening are zero.

You also state this is hurting the people who can least afford it - in this instance it is you who have fallen for all the hype. My experience is that there are a very small minority for whom that applies - the majority simply do not manage their finances properly and then whinge and moan when they get charged - this is why I refer to the 'compensation culture' that is developing and I ask you - what happened to taking responsibility for your own actions ?

Tootsie_Roll

Smasher wrote: »

Penalty charges are against the law. It is not for a bank to impose punishment, they are not the police!
Trust me, if a ruling went in favour of the banks next year, you will be as disappointed as anyone else. Wait until you get your first bank statement or phone bill after such a ruling to find that a few new services have been added to your account and your bill is 5X more than usual. You wouldn't be able to contest it if there is a high court ruling that a company can legally force new "services" on their customers without negotiation..

The law has yet to be proved in this instance so lets not get overly dramatic.

If I break the terms and conditions of any contract I do not think it is unreasonable to be penailsed when I have clearly, on numerous occasions been notified what those penalties are.

Smasher

Tootsie_Roll wrote: »

The law has yet to be proved in this instance so lets not get overly dramatic.

If I break the terms and conditions of any contract I do not think it is unreasonable to be penailsed when I have clearly, on numerous occasions been notified what those penalties are.

Wrong again tootsie, you really need to do some homework before posting stuff like that..
The law relating to penalties has long been established through case law & reinforced on numerous occasions. The cases date back to the nineteenth century and the courts have been consistent in the way that they have ruled on penalty clauses.

Wilson v. Love (1896)

A tenant farmer agreed to pay an additional rent of £3 per ton by way of penalty for every ton of hay or straw that he sold off the premises during the last 12 months of the tenancy. The clause was regarded as a penalty because at the time hay was worth five shillings a ton more than straw.

Dunlop Pneumatic Tyre Co. Ltd. v. New Garage and Motor Co. Ltd. (1915)

In the particular case, the judges held that the sum specified in the contract was reasonable and was classified as liquidated damages. However, in this case, Lord Dunedin laid down rules which are still applied today in these types of cases:

i) The sum is a penalty if it is greater than the greatest loss which could be suffered from the breach – in other words, if it is "extravagant and unconscionable".

ii) If it agreed that a larger sum shall be payable in default of paying a smaller sum, this is a penalty. Ford Motor Co. v. Armstrong (1915)

In this case, the judges reached the conclusion that the sum to be paid for a breach of the contract was substantial and arbitrary and bore no relation to the potential loss of the other party. It was, therefore, a penalty.

Bridge v. Campbell Discount Co. Ltd. (1962)

In this case a customer bought a car under a hire purchase agreement. He paid the initial and first payments and then cancelled the agreement. The company tried to recover the sums specified in the contract for canceling the agreement, but the courts held that the sums payable were excessive and constituted a penalty clause. It was, therefore, unenforceable.

Murray v. Leisureplay (2004)

Mr Murray was sacked by Leisureplay and he claimed three years' salary as per his contract of employment. The courts decided that this clause was a penalty clause and he was not entitled to this level of damages.