Why a bank charges win doesn’t mean the end of ‘free banking’ blog discussion

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  • jrawlejrawle Forumite
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    acwalters wrote: »
    :money:


    I must disagree - the "well-managed" account holders do not pay any interest, fees, etc, and thus do not make any money for the banks - why should the banks want them the most? What the banks want are the ones who use their overdraft regularly, incur fees etc. Obviously, they are not looking for completly irresponsible borrowers who won't pay back, but the "perfect customer" is not "well-managed"


    Banks' main business is investment. If your account is in credit, they are using your money to invest in financial markets. That's actually the biggest source of income for banks. That's why banks like customers whose accounts are always in credit. Banks are already making money out of financially astute customers, so those customers shouldn't be punished by the introduction of monthly fees.
  • PhiltheBearPhiltheBear Forumite
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    acwalters wrote: »
    However, there is a law here that all banks have to follow, that if a customer bounces 10 cheques/DDs in a 6 month period, their account is shut down and they are not allowed to open another one for a year.

    In Brazil if you bounce 5 cheques - in your lifetime - you get your account shut down and you are never allowed to open another.

    PhiltheBear
  • jrawlejrawle Forumite
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    Martin, I really hope you are right and that account fees won't be introduced. But let's remember, banks are out to maximise their profits, so if one method of making money it outlawed, they'll do it some other way.

    I've never paid bank charges, and I have a high interest current account that makes £7-8 per month. My bank invests the money I have in my account to make a profit, and in return I receive banking facilities. I do not like your suggesting that free banking does not exist. You're right if you consider the way the bank uses deposits; however the implication of what you say is that you think monthly fees would be OK.

    If your campaign to scrap charges for people who are careless with their money results in me receiving no interest and having to pay a monthly fee, you will have been responsible for losing me money each month - far from being a "money saving expert". There is a huge problem in this country with people not knowing how to budget properly, as you begin to accept in the final part of your article. All this bank charges case will do is redistribute the charges, which could very well mean rewarding people who spend without thinking, and punishing those of us who save (and isn't saving money the very basis on which your site it founded?)

    Maybe you're right and we won't see the introduction of monthly charges. Other alternatives the banks have are increasing the interest rate on unauthorised overdrafts (and authorised ones); they may also say that people on low incomes can't have free bank accounts, or can't have debit cards or whatever. The alternative we won't see is banks making less money - this is one we can't really win.

    Perhaps you should concentrate on helping people to spend less money so that they don't need to borrow, instead of campaigning to get the banking system changed to reward people who are in debt. But of course, jumping on the bank charges bandwagon means you receive far more media appearances - and we know who profits handsomely from that!
  • PhiltheBearPhiltheBear Forumite
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    jrawle wrote: »
    If your campaign to scrap charges for people who are careless with their money results in me receiving no interest and having to pay a monthly fee, you will have been responsible for losing me money each month - far from being a "money saving expert". There is a huge problem in this country with people not knowing how to budget properly, as you begin to accept in the final part of your article.

    I think you are missing the point. I, like you, used to have a lot of money in the bank. I too got interest paid to me on my account. And that's fine. But, being prudent, I kept a small balance in my current account and a considerable amount in a linked savings account so that I could transfer from one to the other whenever I needed to.

    However, if a direct debit or a standing order was paid early, say at a weekend for the bank's convenience then I may not have had enough in my current account to cover it (I usually did but once or twice I didn't). My bank would charge me £39 a time for this. It cost them virtually nothing. They could, just as easily, have set up a system to transfer money from my savings account automatically in such a case. And I would have been happy to authorise them to do so and even have paid a small fee to set it up. The cost to them, again, would have been minimal.

    The simple fact is that the charge of £39 is out of all proportion to the 'crime' of going overdrawn. Indeed, in most cases, especially when you are on a low income they won't even let you go overdrawn. They just stop the payment and still charge you.

    Because my other half developed cancer I stopped working to care for her. I couldn't get benefits because of my savings. I went through all my money and now, thankfully, do get benefits of just under £60 per week. That's it. That's all I have to live on. And you expect me to be sympathetic to a bank that will charge me £39 when a charge hits my account at a time over which I have no control? This is not about being able to 'budget properly'. It's about a lot of people who have no options being hit time and time again by unfair bank charges. I challenge you to spend only £60 a week. To include everything - food, fuel, transport, clothing. I'd like to see what budget you'd come up with.

    I would have no problem with any of these charges if they were fair and reasonable. But, as I used to make my money from providing banking computer systems, I know fine well that they aren't. They are pure profiteering. They are bully boy tactics by powerful institutions against, mostly, those who can't fight back. You see, I can't try and reclaim my unfair charges through the courts, because I can't afford the court fees.

    PhiltheBear
  • jrawlejrawle Forumite
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    @PhiltheBear: I have great sympathy for you and for people in your situation. More help should be provided by the state to help people in such difficult circumstances (e.g. stop paying benefits to people who are just too lazy to work, and give the far smaller number of people like you a decent sum to live on instead). I would also like to think the banks would show compassion by at least giving you an overdraft facility. But that's another issue. The vast majority of people I see ranting about being charged by their bank are not in any difficult circumstances at all.

    Going back to the first part of your post. I don't think direct debits are ever paid early because of a bank holiday or weekend. They are paid the next working day.

    I switched to a current account that pays a better rate on balances up to £2500 than most savings accounts. Before I had the high interest current account, I used a system like the one you used to. But I'd never play with fire and keep such a small amount in my current account that one direct debit would make me overdrawn. If you gamble, you're sometimes going to lose.
  • ChrysalisChrysalis Forumite
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    You have to admire the profiteering genius of this system. Instead of not paying, the banks created a system where they would pay out, but would charge £35 a pop for every transaction - no matter how small - beyond that limit. It’s no wonder they now make from £1.6bn to £3bn a year from this. In the past once you couldn’t pay out you’d know as the payment wouldn’t go through.

    Martin my bank stopped clearing payments that breach my authorised overdraft limit but I still recieved letters stating a £35 charge for a 'bounced' direct debit so the banks are charging whether the payment is made or not.

    Glad you commented that direct debits are not as good as they seem, I try to avoid using direct debits when possible for the very reason that they remove the ability to juggle bills and pay at your own choosing rather than get charged when the money isnt in your account to pay a bill on a set date.
  • .....I'm a bit confused...... (not difficult)! I had a claim pending with my bank until the test case was heard. Does this mean that I won't get my money back re bank charges, or is this just a small step.....?

    Am new to this, so just like to say keep up the good work!

    M
  • PhiltheBearPhiltheBear Forumite
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    jrawle wrote: »
    Going back to the first part of your post. I don't think direct debits are ever paid early because of a bank holiday or weekend. They are paid the next working day.

    I switched to a current account that pays a better rate on balances up to £2500 than most savings accounts. Before I had the high interest current account, I used a system like the one you used to. But I'd never play with fire and keep such a small amount in my current account that one direct debit would make me overdrawn. If you gamble, you're sometimes going to lose.

    Direct debits are instigated by the company taking them - not the bank (so it would be fair to argue that this wouldn't be the bank's fault). The bank merely carries out the instruction. But it IS the case that a company taking a monthly payment can vary the day it takes it. For example, I have a direct debit which says it will be taken "on or around the 10th day of the month". If the 10th day is a Saturday they have been known to take it on a Friday.

    The same thing can happen with standing orders - it depends on the bank. There are NO rules which cover this (maybe there should be).

    However, whichever happens it may be the case that you, the customer, are waiting for a payment in that you reasonably think will reach your account before the DD or SO is taken out. If you are on a tight budget then this can be crucial and you simply may not have the leeway to arrange for money to be available to cover it.

    And if your cup needs to overflow and you ask your bank to stop a Direct Debit - they won't!! You have to get the company that you set up the DD with to stop. I invite anyone to try this with the likes of British Gas, Vodafone, etc. I'll bet you a racehorse to a bent penny that 90% of such requests fail and that a further payment is taken after they were supposed to stop.

    My point is simply this. There are people who don't care and fall foul of the rules. There are some people who don't understand the rules. But there are a lot of people who do understand the rules and try and meet them. Being poor is no indication of moral compass. Whatever the reason the 'penalty' imposed on any of these is out of sync with the 'crime'. The only reason for such charges is that the banks found an easy way to make money at it.

    Would it not be reasonable for a bank to say "Hey, you went over your limit. That's going to cost you a punitive rate of interest while you're overdrawn. For telling you we'll charge you £5 - which more than covers our costs of sending you this letter and dealing with any enquiry you are going to make to our very cheap call centre in India".

    Or even - "We can't meet XYZ payment because you didn't have sufficient funds. It costs us £2 to find that out and £1 to generate and send you this letter so we'll be debiting your account by £3."

    How does that get turned into "We're not paying a DD and we're charging you £39"? There are laws preventing the charging of excessive interest rates - to stop doorstep lenders. As far as I'm concerned charging £39 for actually not doing anything is simply theft and there is nothing that justifies it.

    PhiltheBear
  • JS64JS64 Forumite
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    dchurch24 wrote: »
    There is also a HUGE point that has been missed so far.

    The Wages Act was changed in the 80's to allow Maggie's mates to more or less have a captive audience when it came to bank accounts.

    There was a time, when only the wealthy were 'allowed' bank accounts (how I long for those times!).

    Anyway, the wages act was amended in the 80's giving the rights of the employee to the employer with regards to how wages are received. This of course was welcomed by big employers. They no longer needed to keep huge sums of cash on site, and the whole thing could be automated and savings could be made. There were also other incentives from the bank that are of course now long gone in favour of making more money, now that everyone is signed up and they have a monopoly.

    All fine and dandy you might think - well, I don't, I have nearly managed to do completely without a bank account for about 6 months now. I just have one last cheque I need to pay into an account with my name on it and I'm nearly there.

    ...but I digress.

    The ECHR Act has a clause that stops any (local - i.e. member state government) gov. from passing legislation that forces EU citizens into buying third party goods or services.

    Now, if we have to 'buy' these services from banks, remembering that we cannot actually choose to not do so unless you have a very sympathetic employer, then we are in exactly that position.

    By way of monopolisation and legislation we have been forced into buying a third party service.

    I think the banks have opened themselves up to a whole lot more than just a bank charges issue.

    Corruption, EU laws, monopolies, price fixing...the list goes on.

    Even if they have friends with funny handshakes here, I can't see defending these sorts of claims being very cheap to do.

    Of course, for some reason, the QCs in the current case keep bleating on about how they will have to start charging every customer if they lose etc...

    !!!!!!??? What has that got to do with the legalities of their current charging regime? Nothing. So why bring it up in a case about it. Why? Simply to garner public support from the people that don't have these charges.

    So, if they lose this case, they will have to make a commercial decision as to what they do with their 'banking model' - so what? What has that got to do with whether or not the UTCCR is relevant?

    Their other argument was that a law passed in 1999 supersedes existing CASE law. Nothing can do that - another mis-direction.

    Their whole argument seems based on half-truths and mis-direction.

    If the Wages act reverts to it's pre-mid 80's state, then the whole issue of bank charges becomes moot. People who are being ripped off will simply not use a bank any more.

    If I don't like the price I pay in Dixons for a DVD player - I simply don't buy it. We need that choice back when it comes to THESE services. Only that way can we have true competition back in the banking sector.

    At the moment, all a bank can do is to poach customers from other banks. There are very few new bank accounts that they can make money from, and they all operate in much the same way - (substandard service - it's cheaper that way, and usually mistakes will end up with them having more money from you as it's so much hassle to fight to get that 20 or 30 quid back due to the aforementioned substandard service.

    With that in mind, they really don't have to compete as the same old customers are being passed around from bank to bank slowly realising that they are all as bad as each other - and yet, when all banking options are exhausted - there is nowhere else to go. You HAVE to have a bank account as your employer has said so - despite the fact that legally the money is yours - you earned it, yet you do not have the choice of how you receive it, and thus are pushed into buying a substandard service that you may not want.

    This situation is exactly the reason that particular clause was put in the ECHR Act; and as usual it's ignored by our government (when it suits them), and like most other laws, ignored by British banks.
    I am very interested in how you live your life without a bank account.
    I am sure other people are as well
    Does anyone know what the legal position is of someone who has a job but for what ever reason does not have a bank account?
    I am sure there are people who for what ever reason cannot get accounts of any kind.
    How are they paid?
    Does anyone have any experiance of this situation?
    I'd be very intersted to know.
  • LesDLesD Forumite
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    jrawle wrote: »
    Martin, I really hope you are right and that account fees won't be introduced. But let's remember, banks are out to maximise their profits, so if one method of making money it outlawed, they'll do it some other way.

    ...and anyone who thinks they won't really is living in cloud-cuckoo land!

    I've said it before, and I'll say it again, I cannot rationalise how reducing the COST of debt is likely to lead to those folks being encouraged to reduce the LEVEL of their debt.
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