Bank Charges (yep, that old chestnut again)

[cwathen]

A couple of years ago, following several high profile cases of people succesfully recovering large sums of money from their bank made up of ludicrous charges, there was an equally high profile test case where several banks and building societies went to court to have it decided once and for all whether or not it's OK to commit extortion and then hide behind a contract, which is what happens every time your bank charges you a plucked out of the air figure for being a day late with your credit card bill or going a few pence outside of your overdraft limit.

Then the credit crunch came, and now that case all seems to have gone very quiet.

Does anyone know if this case is still going on, and if so what the current state of play is with it?

[DVB Cornwall]

It is still ongoing and will continue to the Supreme Court of the United Kingdom on Appeal, don't expect a resolution until late 2010 at the earliest.

As for the validity of the charging process, I think my views would not be appreciated.

[all new Phil]

Quote from David Cameron on the subject of bank charges, from the latest Money Saving Expert email...

When it comes to the question of bank charges I know there are a number of unresolved legal questions, and that the original judgment on the charges is now being appealed. Obviously, we shouldn’t second-guess any possible court decision, but once the legal issues have been resolved I agree with you that bank customers must be compensated quickly and fairly for any unfair charges that they have had to pay.

So I've asked my Shadow Treasury Team to look at your suggestion that banks should pay money back automatically if the courts do rule that the charges are unfair. They will be in touch with you to take this forward and go through the details, and I hope you will feel able to stay in contact with them to discuss this further.

So, in essence, the Conservatives are looking into automatic payback from banks of any charges levied on their customers. Which begs the question - is this *really* the most sensible option, bearing in mind how many millions of pounds this would cost the banks? I suppose in one sense, it would be great for the economy if thousands, if not millions of people got a sudden unexpected couple of hundred or thousand quid. But is this likely to happen, or is this just opportunistic rhetoric in the run up to an imminent election?

[Sput]

I know which one my money's on

[cwathen]

As for the validity of the charging process, I think my views would not be appreciated.

Nothing wrong with healthy debate!

In my view (and sadly this test case isn't going to examine it) the way the entire banking system works is slightly corrupt - the actual infrastructure now in place allows for transactions which don't involve physical handling of cash or cheques to take place instantly regardless of what time it is. Even 'physical' transactions *could* happen much quicker than they actually do.

Yet even though the UK banking system now has this 'live' infrastructure the banks within it have not passed this benefit on to the public. To that end we continue to be subject to a system which is being kept artificially slow; amongst other things it still takes a week to clear a cheque, transactions made after 3:30 still don't count until the following day and everything is still put on hold for the weekend.

This is done because moving the banks can profit out of these artificial delays - they can earn interest on money which is 'being cleared' and the ability to push transactions onto the next day can cause payments made on a due date (but therefore still on time) to technically be late (and of course late payment fees applied to credit facilities which are maxed will cause those facilities to go overlimit triggering an overlimit fee).

And what about those 'charges'? They are part of this 'lets hold on to the past because it'll make us money' way of working. In the past, before living your life on tick was advertised by the banks as the ideal way of doing things, charges for things like late payments, exceeding limits or returning transactions unpaid were justified as being due to the extra work that these things caused on your account. Even then they were probably largely unsubstantiated.

Now however, they reflect little or no actual work at all, and certainly nothing near the value of the charge applied - no bank will ever provide you with a breakdown of a bank charge because they can't - there's nothing there to be broken down.

Surely, for something to be a 'charge' then the party making the charge must have first incurred an expense which you need to repay - which of course should be able to be substantiated.

If by 'charge' they actually mean 'financial penalty as a punishment for breaking something you've agreed to in a legally binding contract' then banks aren't making charges at all - they are fining people.

And they are issuing fines in a summary manner with no due process, at a level which they set, without the jurasdiction of a court of law, without consultation, external scrutiny, or representation available for the person being fined, with there being no process at all by which the fine can be appealed - and because the charge isn't invoiced and paid but instead the money simply disappears out of your account, even the direct action of witholding payment is impossible.

How on earth anyone can support this is beyond me.

[Chie]

So, in essence, the Conservatives are looking into automatic payback from banks of any charges levied on their customers. Which begs the question - is this *really* the most sensible option, bearing in mind how many millions of pounds this would cost the banks? I suppose in one sense, it would be great for the economy if thousands, if not millions of people got a sudden unexpected couple of hundred or thousand quid.

The banks owe a lot of money to a lot of institutions and right now it's ordinary people (loyal customers of the banks) who should be first in line to get theirs back. Everything else can wait.

But is this likely to happen, or is this just opportunistic rhetoric in the run up to an imminent election?

If you're a non-Conservative supporter than you more than likely say the same thing about all of Cameron's policy proposals. Whereas of course everything Labour say is still taken as gospel.

[DVB Cornwall]

I think I'll bow out of this discussion as my views on this have been compared elsehere to those of The Sheriff of Nottingham or Genghis Khan, suffice to say that without a significant punishment element to any charge it distorts the argument wholly unfairly to the favour of the defaulting customer, if the banks lose the case many people will be without banking facilities as they'll be withdrawn.

Most banks are operating faster payments now so the clearing argument can be cast into history as well.

[Chie]

I think I'll bow out of this discussion as my views on this have been compared elsehere to those of The Sheriff of Nottingham or Genghis Khan, suffice to say that without a significant punishment element to any charge it distorts the argument wholly unfairly to the favour of the defaulting customer, if the banks lose the case many people will be without banking facilities as they'll be withdrawn.

Banks have the ability to prevent customers from going below £0.00. I know they can, because they finally did it to my account last year and it became physically impossible for me to go overdrawn. They obviously don't do this to all accounts as standard, because they want people to fall into the unauthorised overdraft trap and make a profit from it.

I once needed some money in an emergency and was able to withdraw £200 from the cash machine, even though my actual balance was £0.00 :roll: It was silly of me, but I needed the money and the bank system let me take it (there doesn't seem to be a limit to how much you can take - it's a bottomless pit).

It turned out I couldn't afford to pay the money back and the charges then spiralled out of control until I found myself nearly a grand overdrawn. The only way out was to accept a loan from the bank (which they offered as a solution) to pay it all off and start again.

I now have to pay back £30 per month over the next three years, all because of that stupid £200 they let me take in the first place. But the point is, they didn't have to. And had they simply charged me interest on the unauthorised overdraft like any other debt, then I would've been ok. But the charges were ridiculous.

I don't have any sypmathy for the banks. They're capitalist institutions and they know full well what they're doing.

[cwathen]

In the interests of considering the other side of the coin, I do understand that a bank needs you to pay things on time and stick within limits agreed and there is a case for those who fail to do that being charged for this. But why can't it just be a little fairer rather than greedy? How about this:

* Charges capped at £10 per incident, to a maximum of £50 in any one month.
* Interest cannot be added to charges.
* A single occurance can only trigger a single charge, no more 'stacked' charges (things like a charge for returning an item causing you to go overlimit triggering a charge for that too)
* Overlimits of less than £10 cannot be charged for
* Any overlimit which is corrected within 2 working days or less cannot be charged for
* Late payments of 2 working days or less cannot be charged for.
* The charging system being subject to external scrutiny and a clear appeals process implemented with the appeal being considered impartially by an external body.
* Charges are not actually applied until 28 days after notification of them being placed to allow time for any appeal to be made, and when an appeal is in progress cannot be applied unless and until the appeal is overuled.

That way the banks would still retain the ability to charge people, without turning people who make minor mistakes into cash cows - and they'd still make a mint from it, even a £10 charge would not reflect any actual cost to the bank.

Which begs the question - is this *really* the most sensible option, bearing in mind how many millions of pounds this would cost the banks? I suppose in one sense, it would be great for the economy if thousands, if not millions of people got a sudden unexpected couple of hundred or thousand quid. But is this likely to happen, or is this just opportunistic rhetoric in the run up to an imminent election?

Well if the charges are ruled illegal, then the millions of pounds the banks will lose is millions of pounds they should never have had - they should have thought about that before making the charges.

Some banks are IMO making a rod for their own backs at present. I have two main bank accounts, one at HSBC and one at Natwest. Both are currently polar opposites when it comes to current charging policy. HSBC have completely eased up on their charges, granting considerable grace periods for you to correct any faux pas made, and small misdemeanours no longer even triggering charges at all - presumably they are looking at a kind of damage limitation by not applying charges when it's on the card that they might have to pay them back, and by making sure that only serious breaches trigger a charge, reducing the chance that charges made in the past will be remembered and claimed back.

Natwest on the other hand seem to have adopted an utterly ruthless policy - they will no longer waive any charges as goodwill gestures (apparently because of the court case) and ANY and ALL breaches, regardless of how much they are for or how long they last are now met with a £28 charge for each occurance. Presumably their view is to take as much money as they can whilst they can in case the plug is pulled on them doing this - perhaps forgetting that this means those unfotunate enough to live in their overdraft with a natwest account are going to be beating a path to their door to get all this money back if it's seen to be illegal.

[Sput]

I once needed some money in an emergency and was able to withdraw £200 from the cash machine, even though my actual balance was £0.00. It was silly of me, but I needed the money and the bank system let me take it (there doesn't seem to be a limit to how much you can take - it's a bottomless pit).

It turned out I couldn't afford to pay the money back and the charges then spiralled out of control until I found myself nearly a grand overdrawn. The only way out was to accept a loan from the bank (which they offered as a solution) to pay it all off and start again.

So...are you saying it's the bank's fault that you knowingly overdrew and weren't sure you could pay back quickly? I couldn't go along with that logic.

[all new Phil]

But is this likely to happen, or is this just opportunistic rhetoric in the run up to an imminent election?

If you're a non-Conservative supporter than you more than likely say the same thing about all of Cameron's policy proposals. Whereas of course everything Labour say is still taken as gospel.

I'm a Conservative supporter.