OFT to investigate bank charges: should I be cynical or optimistic?

So OFT has been instructed by the High Court to investigate bank charges: TaxAssist Accountants - OFT to investigate bank charges

Should I be rubbing my hands with glee happy that I should be getting a fair whack of dosh back for going £1.70 overdrawn (or other piffling amounts) several times in the last few years...

Or should I now be worried that if I do ever take the suggested action and push the bank to the limit of a small claims court fight that an OFT ruling might put all those ludicrous charges firmly out of my reach to claim back?

Basically, will OFT do the decent thing and rule that £25 for a computer to figure out you'll go overdrawn is utterly unfair or will they rule that though it's unfair you knew it when you signed up for an account, basically buggering us all...

Further, if OFT do rule in favour of the consumer, what'll the banks do to continue earning their stupidly high profits? Maybe make overdraft interest massively higher? Perhaps put a huge hike on 'penalties' such as unauthorised overdrafts etc?

Personally, I think the banks and their sheer bloody greed are the SOLE reason we've slammed into the credit crunch now... and the fact that we, the taxpayer, are bailing out Northern Rock is, frankly, disgusting.

But I digress... will OFT force the banks to refund their charges? I bloody hope so, not from a financial point of view but from a 'teach the bastards a lesson' view.

I've long detested banks and their attitude to their customers but unfortunately in these days of e-payment for just about everything, they're a necessary evil, one that they have taken FULL advantage of.

So PLEASE OFT, do the right thing and stop these charges.

Whether they stop these charges or not, the banks will extract a similar amount of money from the customers.

If they make them pay back £3+ billion worth for every year of these charges, they may choose to stop free banking and charge for an account. Even a small amount charged on every single current account will give them a great boost and will cover the payback. But in the long run the customers will lose as the charges in the longer term will be much more expensive - especially ones who have managed to keep a good grip on their accounts and have not gone overdrawn (piffling amounts or not).

Personally I have never gone overdrawn because I have been careful with my accounts - and I would prefer not to pay a monthly charge for a current account.

I think the banks should be allowed to charge if you go overdrawn without prior authorisation or be allowed to totally block the transactions from going forward. £30 may be a bit steep - but I would certainly support anything up to about £15. And then keep the current accounts free for everyone.

It is true that they could still give you free banking, but they are used to a certain profit level and they will attempt to keep to those margins. After all, they are a business with shareholders and not some charity organisation holding on to people's money out of the goodness of their hearts.

Nope, I totally disagree.

A bank isn't interested in my money out of the goodness of it's heart, it's interested in my money to re-invest in something else and make more money while giving me a paltry return on my investment in them.

The issue is, banks have become a fundamental part of our lives. You can't get paid without a bank account, you can't get a mortgage without a bank account... companies offer discounts only to those paying by DD, which needs a bank account and so on and so on.

So a bank account is as essential as a national insurance number.

But the problem is that banks are all for-profit organizations and they've taken advantage of the fact a bank account is essential to make as much money as possible.

No, I don't want to see the day of pay-for accounts, we've already been there and done that (Halifax and Lloyds to name two that used to charge) but even £15 for not paying a direct debit is too much, especially as the bank claim this is a 'cost' they incur when your lack of funds causes DD or SO to not go out.

tbh, I could not give a toss if the banks made less money, it's obscene the amount they do make and, as per my original post, it's the banks that are to blame for the current economic situation.

Make the buggers pay up... see how THEY like being screwed for charges for once! :)

I see your point, Nick, regarding how bank accounts have became essential to modern life. It is another classic case of a privatised infrastructure and all the problems that brings :(

To go on a brief tangent and be picky about your opening post for a moment, the High Court did not instruct the OFT in this case to do anything. The case was, I believe, brought forth by the OFT to establish if they had jurisdiction and which rules could be applied. It wasn't a total win for the OFT, either, sadly. They ruled that whilst OFT had the power to declare the appropriateness of the fees, the decision could not be made under common law (meaning no existing court rulings apply) and that the bank's terms and conditions could not be considered incomprehensible. The BBC news has a rather nice article on the issue.

Personally, I strongly suspect that the OFT will take a 'middle ground' type ruling. The banks are allowed to charge penalty fees, but only to the degree that the causal act has directly inconvenienced them. Although this is believed to realistically be in the region of £2, I suspect they will allow up to £10. This will allow people to bring backdated overcharge cases against the banks, but I strongly suspect that the OFT would not insist on automatic repayment for all customers.

The key problem in all of this is the maintenance of access to free or low-cost banking. Due to the enormous power that banks hold over the populace's money and the economy itself, the OFT is effectively coerced into having to listen to them and placate their plaintive cries.

It should be noted that the Banks themselves have created a lot of this mess. Few if any banks offer paid-for current accounts that have features that actively sell them to the general populace, and in their desire for maximising their possible trading reserves, they pushed free banking so hard as to kill a lot of the potential appeal of a paid-for account.

All I know is, the nano second someone rules these charges are illegal, all Barclays base will belong to me.

Obviously banks are commercial institutions and have to cover their costs and make a profit for their shareholders. That's the point of being in business.

But is it right that those profits should come from those people who can afford them least? Let's face it, if you are in the position of being stung for these charges it's because you haven't got much money.

Why should somebody with thousands of pounds in his account get his banking subsidised by somebody who is struggling to make ends meet?
It doesn't seem fair to me.

Everybody is making a big fuss about the abolition of the 10% tax band but the high rollers are getting free banking because the banks are leeching off the poor.

We always used to pay charges. Per transaction and per service. Nobody thought anything of it. You recieve a service and you pay for it. Why would banking be any different to having your suit dry cleaned or your car serviced?

"Free" banking only came in in the '70s iirc and I can tell you that they didn't tell people that it was going to be financed by driving low income people further into debt. I suspect if they'd put it in those terms it might not have been such a popular move.

Quote:

---

Originally Posted by Betty_Swallocks

Obviously banks are commercial institutions and have to cover their costs and make a profit for their shareholders. That's the point of being in business.

But is it right that those profits should come from those people who can afford them least? Let's face it, if you are in the position of being stung for these charges it's because you haven't got much money.

Why should somebody with thousands of pounds in his account get his banking subsidised by somebody who is struggling to make ends meet?
It doesn't seem fair to me.

---

Because if you've got a reasonable deposit in your account, the banks are earning from it and you are therefore paying for the account that way. So those peoppe are paying for the service.

Quote:

---

Originally Posted by Betty_Swallocks

Everybody is making a big fuss about the abolition of the 10% tax band but the high rollers are getting free banking because the banks are leeching off the poor.

We always used to pay charges. Per transaction and per service. Nobody thought anything of it. You recieve a service and you pay for it. Why would banking be any different to having your suit dry cleaned or your car serviced?

"Free" banking only came in in the '70s iirc and I can tell you that they didn't tell people that it was going to be financed by driving low income people further into debt. I suspect if they'd put it in those terms it might not have been such a popular move.

---

The 10% tax charge and bank accounts are hardly the same thing, let alone charges on bank accounts. It's an inappropriate analogy.

The tax bank is levied by government on ALL earners that earn enough to be paying it, and the reason people are peeved is because the government (and a supposedly Labour government at that) introduced what they claimed was a "tax neutral" budget that reduced taxes for the well-off and financed it by increasing taxes on a large chunk of the lowest earners. And if you're one of those lowest earners, it's next to impossible to avoid being clobbered by that .... at least, next to impossible to legally avoid it.

But it's easy to avoid bank charges. Either you don't have a bank account, or you don't keep going into unauthorised overdraft on it. Why should those that don't do so pay for those those that do? There are plenty of low-paid people that struggle to make ends meet without constantly going into unauthorised overdraft. And they therefore don't pay charges. It isn't low earners that are clobbered. It's those that either won't or can't or just don't keep their own finances under control.

Quote:

---

Originally Posted by Saracen

It's those that either won't or can't or just don't keep their own finances under control.

---

Ok, and it's fair to charge those that won't, can't or don't?

Of course, back in the day when a person sat there with a balance sheet and had to physically check your account, I can see where a charge might be incurred... the bank has to pay someone to check that I'm keeping my account in line, but today?

Can anyone tell me exactly HOW it costs the bank £25 to not pay a Direct Debit?

Now don;t go getting unauthorised overdrafts confused with non-paid DDs or SOs, that's a different matter. I'm talking about those damn charges when the bank doesn't pay a DD because it would take you £.50 into the red for a £50 DD or something equally as petty.

Can anyone explain how the bank has incurred a £25 cost to not pay my DD?

It's just a money spinning con.

And those that don't have a huge amount of disposable cash just need a couple of tight months with unavoidable costs to find themselves shorter the next month because of bank charges... and then the next month and so on and so on. Instead of having enough cash to put away in savings, before you know it all you're doing is paying off bank charges every month.

I know, I've been there.

Oh and for the record, my every bank I've been with has been so inefficient it's laughable. But can I charge them when they sod up? Nope...

Quote:

---

Originally Posted by Nick

Ok, and it's fair to charge those that won't, can't or don't?

---

Yup, it is.

Whether the size of the charges is fair or not is another matter (and I'd say generally they're not), but getting charged certainly is fair.

Quote:

---

Originally Posted by Nick

Ok, and it's fair to charge those that won't, can't or don't?

---

Yes it is.

£30 may be a bit high. But there SHOULD be a charge.

Ok, let me rephrase that... It's fair to charge £25 when there's insufficient funds in your account to cover a payment?

The point being banks aren't incurring a cost of £25 for not paying a DD, yet that's what they charge you...

Quote:

---

Originally Posted by Nick

Ok, let me rephrase that... It's fair to charge £25 when there's insufficient funds in your account to cover a payment?

The point being banks aren't incurring a cost of £25 for not paying a DD, yet that's what they charge you...

---

Service charge - not penalty charge. Its not based on cost to them. Is it fair to expect the banks to cover your shortfall or your inability to schedule payments to come out as suits your bank balance ?

They can charge whatever they want, as long as customers pay it. I personally think £30 is a bit steep, but that doesnt make it inherently unfair.

Many people got their cash back from charges before this action took place. The vast majority of them also had their bank accounts closed as a result.


Although the bank charges were extortianate to say the least, the fact is people were going over drawn and therefore spending money that wasnt theirs. The banks should be able to penalise the people that do this.

It hasnt actually been decided yet if the OFT will let people start to claim their charges back yet or not (like they could before the action stated). If they decide in favour of this though the real sickener is that people that can manage their cash efficiently and have never had an unathorised overdraft are going to be the ones that also have to pay.
You can bet your life to cover this eventuality, the banks will start to charge for the priviledge of having a current account.

None of this wouldve happened if people didnt spend what they didnt have.

A service charge... yep, that's the crux of the whole thing.

As you rightly said, it's a service charge... which is where banks have been falling foul of the law.

They're charging extortionate amounts for a 'service'.

It's like going to KwikFit and being charged £75 for the tyres and £30 for being served... but having them not fit the tyres but still charge you for the service.

Or going to a restaurant and being charged £50 for the meal and £30 for the service... only to not be served the food and still pay for the service.

The point being, that a bank is not actually providing a service but still charging you for it.

In the past they've argues that this covers their costs, but no bank has ever been to court and proved this is the case.

That one case much lauded by the banks where they did go to court and win was when the fella tried to claim back unauthorised overdraft fees, NOT just the un-paid DD and SO (or whatever) charges.

The basis of the cases that approach court and have been, in practically every case, settled out of court, is that the bank is charging for a 'service' that it costs them nothing to provide yet they claim the £25 fee as 'cost' to them, which in law is unfair... and I don't mean the pouting, sulky 'unfair' but the legal 'unfair'.

Blitzen, I agree, folk should not spend what they don't have... but look at my earlier reply for a simple and all too common reason why people do get whacked with these charges.

Quote:

---

Originally Posted by Nick

It's like going to KwikFit and being charged £75 for the tyres and £30 for being served... but having them not fit the tyres but still charge you for the service.

---

Its more like having your car inspected to find whatever you were thinking of getting done was unsuitable for it. You are being charged for the examination/inspection. Are they going to spend time on your car for free ?

Bad analogies from top to bottom in your post.

Like booking at a restaurant and then not turning up - a fair few of them might have taken your card details and will charge you £5-£10 per head in such a case.

The bank is providing a service by providing the framework for a direct debit to occur - Its the customers inefficiency and disorganisation which means that there isnt enough money to go out. They then shouldnt sign up for a direct debit if they cant keep up with it. Sure there might be one or two things where its absolutely necessary, but most allow you to pay on getting a bill.