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

[TheAnimus]

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...

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.

Spot the connection, lending money to people who have no clue how to handle it (ie go to 'un-autherised' overdrawn levels) and the crunch? If you're going to blame the UK Commercial banking sector (as it really wasn't them at all, they do not deal in selling CDOs on US property do they?) Then at least do so in a differen't post to the one where your stating about how they should lend you more money caring less about the risk.

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 is a poor person going to be more likely to be stung? As it stands its rather unfair, the last time this happened to me, my mortgage provider screwed up and took their payment twice, sending me some 1k into un-autherised land. With the same bank i have an instant access ISA product, with more than that in. Why should i be fined anything more than a couple of quid. They know i've got the cash to cover it.

Conversly when i was a student and i went overdrawn because i was drunk in charge of a cash point, i had no savings at all. Even thou i only slipped over by £20, i would of been a much greater risk.

So as it stands, the rich are susbsidising the poor in that regard, or will be from the way a bank will look at it. (balancing risk and return)

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.

Erm they really aren't. Look at every highstreet bank, once you get about 60k per year get paid in, you get the special service. Its hardly been funded by the poor at all.

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.

Seem to really have a chip about this. The rich often still have to pay for these services, certain payment methods are too slow when your transfering vast amounts of mullah. Same goes for businesses. As it stands now its very fair, people like my nan have to pay nothing directly for their banking (only in intrest) the only ones who have to pay are those who don't agree an overdraft.

And the super rich, well they don't bank with the likes of the pleb banks we use anyway.


But on this topic, as i've said before its simple.

"Hi can i arrange an overdraft of £500 please" bank will almost certainly say yes if your in full time employement or education.

Then don't use it except for emergancies simple. You won't get charged a dime so long as you let them know what your doing. Its rude to not let them know your goign to want SOME OF THEIR MONEY. Everyone seams to want somethign for nothing, go work, stop complaining that the poor are been shat apon, in this way they're really not, only the greedy who spend more than they can afford get such a fine.

[Nick]

Let me guess, you work in a bank, yeah?

Anyhoo, if my analogies are bad I'll happily discard those and use yours.

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 ?

So explain just how much time it takes for a bank computer to work out that I don't have enough money in my account... If we're using your example, I'm paying by the hour so unless they're using a difference engine, that's a bloody HUGE hourly rate...

At what point has a human being from the bank looked at my account and decided not to pay the DD?

That's what they're charging me for, yes? They're charging me for the cost of someone managing my account because I can't and they have to pay that person's wages... At least I would presume so seeing as your analogies suggests this... but we both know that the only time a person looks at the account is when I ring up to ask them what the hell is going on.

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.

Which many restaurants have stopped doing, purely because every one of those that were challenged on it were unable to prove that a no-show impacted their business in anyway. Sure, there are cases where someone might've booked the whole restaurant but from experience, you NEVER get no-shows on those... as for individual tables, restaurants may say there's a no-show charge but I've never worked in one that has ever actually used it.

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.

I see... and this framework provided by the bank has these massive costs to the bank if they have a customer who can't manage their account? So it's fair for the bank to pass those costs onto me...

Well, yes, it is fair to pass those costs onto me, I'm not disputing that. What I AM saying is that there's no way it costs the bank £25 if I have a DD not go out... Charge me, yes, but charge me sensibly and don't just sit there making a fat profit off my account.

Animus, the same thing happened to me... two mortgage payments a month for THREE months, one at the old rate and one at the new rate... I ended up massively overdrawn despite no overdraft facility. Took me two more months to get the error corrected and nearly six months on we're STILL arguing over the charges levied on the account despite several staff saying that we wouldn't get charged and then saying we would get refunded when they did indeed charge us... and nothing ever landing in the account. We even got charged three times for an unauthorised overdraft fee and then three more times for an emergency overdraft arrangement fee.

I've stopped using that bank and that account... Does anyone think it's fair I should charge the bank for my time in having to move all my DDs and SOs to a new account? Perhaps at £30 a time per bill I had to move?

[TheAnimus]

Animus, the same thing happened to me... two mortgage payments a month for THREE months, one at the old rate and one at the new rate... I ended up massively overdrawn despite no overdraft facility. Took me two more months to get the error corrected and nearly six months on we're STILL arguing over the charges levied on the account despite several staff saying that we wouldn't get charged and then saying we would get refunded when they did indeed charge us... and nothing ever landing in the account. We even got charged three times for an unauthorised overdraft fee and then three more times for an emergency overdraft arrangement fee.

I got my mortgage company to pay the £90 i'd been fined.

(then also got Lloyds to refund half of it too )

Fact is i think everyone agrees these fees are steep. But its very simple to avoid them. In my case my mortgage company where at fault, so they had to pay them. But if you don't want to pay any fees like this, get a big overdraft and don't use it except for emergancies like this, or simply don't spend money you don't have. I did an overdraft clear challenege with my flatmate about 2 years ago now, where we basically ate toast all month long, no boose etc. And cleared our overdraft back into our money.

Also run your accounts better, you should be able to predict how much money you need to leave in your account to cover costs. Excel, heck even OO are simple to use for this.

Don't want to pay a stupid fine, don't spend money thats not yours.

[Nick]

I'm just gonna turn that one around...

How about the bank stop charging me for a 'service' it costs them nothing to administer?

[grayg1]

Does anyone think it's fair I should charge the bank for my time in having to move all my DDs and SOs to a new account? Perhaps at £30 a time per bill I had to move?

Okay I will just say this for you...

We all live in this world of double standards and in this case we will stay on topic with the following example:

You inconvenience the bank by going overdrawn on your account and they have to take some sort of action because of it and will charge you an administration fee for the inconvenience caused.

The bank inconveniences you in any way shape or form and they can hide behind their great big wall of clauses/terms and conditions. They now turn to you, point at them and say we can't be held liable for any inconveniences caused to you.

[TheAnimus]

How about the bank stop charging me for a 'service' it costs them nothing to administer?

You think it costs them nothing?

Even your most evil corperation's outsourced call centre where workers never see the light of day. It costs them something.

Banks do loose money on overdrafts which they never get back. I belive a major cause is because people die, but none the less some of them will just spend money they can't afford.

This is more like an opertunistic fine thou, there will be some costs in risk, that are far far higher than the autherised overdraft risk.

Also remeber i've never worked for the commercial banking side.

[Sinizter]

Let me guess, you work in a bank, yeah?

No, I dont work in a bank.

Let's agree to disagree on the analogies - because I really can't be bothered to keep wrangling over things which are irrelevant to the question at hand. Points to you if you want to keep score.

The service charges are set and these are made clear to the customers before they sign up for a bank account. If they dont agree with those, let them take their business elsewhere, or to some bank which has lower charges.

£30 is a lot, but there should be atleast £10+ charge on these stupidities. If you cant keep it under control, dont use it. If you dont have money in your account to have a DD come out, then make sure it doesnt have to come out then.

Sure, it doesnt cost the bank £30, but its a service, not recouping of the costs. It does cost a bank some amount of money to administer. How much, I dont know and dont particularly care. They are there to make a profit and they are making it off those who have an inability to control their finances in a decent manner. I have never been charged one of these charges because I kept my account in order - even when I was a student and had to delay paying some bills. I did not put it on DD because I knew there might be problems with the timing.

Lazy customers who cant be bothered to spend any effort keeping their account in order then want to bitch about it when the banks want to charge you for a service they delivered.

[Blitzen]

A bit harsh but i totally agree.

If you are bad with your money, why should the bank not penalise you for it? Even though the charge is high, there still needs to be a charge there.

[Nick]

Hehe, I wonder if you'd all have the same attitude if you were the victim of these charges?

And for the record, I'm not bitching about it, I'm arguing the case for the unfairness at the high price they charge.

I find it something of an oxymoron for a bank to be all warm and cuddly about helping us through life and then actively helping keep people in the red with their charges.

Can't pay a £20 DD because you'll go £3 overdrawn despite paying a cheque in five days ago? Well we're going to charge you £25 for that.

Spent £5.70 on your debit card at Tescos the day before your wages cleared in... that's £25 thank you.

Ooh, that £17.50 standing order will take you 35 pence into the red... so that's £25, cheers for coming.

How is any of that helping the customer? £75 of charges for being no more than £3 short...

And to use the broad strokes of 'if you are bad with your money you get what you deserve' is uncaring in the least.

Tell you what, here's an idea.

If the OFT do rule that bank charges are unfair and we can claim them back, how about all those defending the banks promise NOT to claim.

If these charges are as reasonable as you think, you won't mind if I get mine back as you don't care either way anyway.

Just as I don't care if you start having to pay for your current account when I fleece the bank for all the money they've taken from me for a service that does nothing...

[Blitzen]

Hehe, I wonder if you'd all have the same attitude if you were the victim of these charges?

I have been once or twice in my younger days.
The way i sorted it out was tophone my bank and explain the problem. If you request the charge to be reversed, and you are not a habitual offender, they usually will.

Thing is, it was £35 a on oth instances. Could i moan? Not, not really....i was in effect spending someone elses cash. The DD's came out early and it was my responsibility to make sure there were enough funds there. No one elses fault but my own.

I cant however understand a gripe where if you go a few pence over, they then charge you £30+. Thats just wrong and is stopped now. I think they are only allowed to charge a maximum of £12 (credit cards anyway).

Fact is, if you stay in credit, or within agreed limits, you wont be charged.

The banks arent a charity, they are a business.

[TheAnimus]

or even simpler, just agree an overdraft for such eventualilities.

Check takes 5 days to clear, no problem overdraft cost 5p.

SPend money on debit card day before wages clear, no problem overdraft cost free because it was less than 1p...

Get where i'm going with this? its only their fault, whilst its opertunisitic of the banks to charge so much, they are doing you a service you asked them too, all to often people knowing full well the penalty charges.

[Sinizter]

If the OFT do rule that bank charges are unfair and we can claim them back, how about all those defending the banks promise NOT to claim.

If these charges are as reasonable as you think, you won't mind if I get mine back as you don't care either way anyway.

Just as I don't care if you start having to pay for your current account when I fleece the bank for all the money they've taken from me for a service that does nothing...

I promise I wont claim any back - Indeed, I cant because I have never been charged even when I was running close to the edge.

I really dont give a **** even if I have to pay a small amount per month for my account - it wont even make any difference to me.

But it will make a difference to all these people who have been so "unfairly" taken advantage of and dont have enough money to pay for their weekly groceries.

So the people most affected after this will still be the ones who were most affected before. Except they might feel warm and fuzzy about getting one over on the banks for the short term. There will always be some charge for going over the limit, even if it will be smaller, and the same lot will just continue in the same vein. All good.

Would it really have been so hard to set up a small OD limit of maybe £50 in the beginning ? Sheer laziness.

[Saracen]

or even simpler, just agree an overdraft for such eventualilities.

Check takes 5 days to clear, no problem overdraft cost 5p.

SPend money on debit card day before wages clear, no problem overdraft cost free because it was less than 1p...

Get where i'm going with this? its only their fault, whilst its opertunisitic of the banks to charge so much, they are doing you a service you asked them too, all to often people knowing full well the penalty charges.

Actually, just agreeing an overdraft doesn't work. Some of the charges in question are for exceeding an agreed overdraft, which pouts us right back at square one.

Nick, to a point, I agree with you. But only to a point.

There seem to be three ways of looking at this issue.

1) These charges are grossly excessive and shouldn't be made at all.

2) Making a charge is okay, but the charge should only reflect costs incurred by the bank.

3) Making a charge is okay, and making a profit is okay, but the size of the charges being levied is excessive and unfair.


My opinion is that option 1) is unsupportable, and further, not reasonable. It is entirely in the customer's hands, the vast bulk of the time (*), to avoid charges simply by complying with the duty the contract places on them to operate their account properly. Do that and you don't get charged. And if you don't do that, the banks are perfectly entitled to charge. What they charge is another issue.

Option 2) is getting close to the issue, but still isn't quite there. If we agree that in the relevant circumstances, a charge is okay, then we're arguing about the size of the charge. Option 2) says that that charge should only reflect costs, but I don't accept that. If you put the banks in the position of providing unagreed credit, you are using a service. The charge for that service should be reasonable, but isn't limited to strictly reimbursing costs. if you hire a garage mechanic to inspect a car you're buying, or a plumber to look at your boiler, or a web designer to design you a site, you're engaging someone for a service, and you expect them to make a profit on providing that service. The same principle applies with an unauthorised overdraft - by setting up the situation where your account goes into unauthorised overdraft (or exceeds an agreed one) you're engaging the bank in a service - i.e. provision of an unagreed credit facility. And that entitles the bank to charge for providing that service, and not just to cover costs. The charge needs to be "fair", however.

Option 3) is pretty much where I am, and by the sound of it, Nick, where you are too. And it's also pretty much where the legal process currently stands.

So are the banks charge levels fair or not? As I said some time ago, IMHO probably not. Given that the process is largely automatic, it seems rather excessive for the level of "service" supplied, and the costs incurred. But that is the point that has yet to be decided. Are these charges fair, and if not, what future charges would be and what level of reimbursement is due to customers overcharged in the past?




(*) There are exceptions, such as when a problem occurs due to outside factors, like your employer screwing up your paycheck and the payment not arriving on the due date. thereby causing an overdraft that was not of your making, and charges resulting from that.

[TheAnimus]

Actually, just agreeing an overdraft doesn't work. Some of the charges in question are for exceeding an agreed overdraft, which pouts us right back at square one.

I have an agreed overdraft in place of twice my monthly net salary.

I never, ever, ever go into the second half of it. Thats just their in case my mortgage company try to screw things up again.

its free, because i don't use it.

An overdraft is for temporary borrowing only, you shouldn't be living in it, and if you are then the bank should punish you.

[Saracen]

.....

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...

Depends on the circumstances but arguably, yes you can. It has certainly been done in the past ..... and I've done it.

Years ago, I sold a car and deposited the money (several thousand quid) in my bank account. A week or so later, I checked that the deposit had cleared (and it had) and was available for drawing on (and it was), and so I wrote a cheque to the building society for most of it. I was, I might add, in the process of applying for a mortgage with that very building society.

The bank bounced the cheque stating "insufficient funds", and the first I knew of it was when a letter arrived from the building society. I exploded .... at the bank. Oh, the explosion was polite enough, but nonetheless, I was furious and they knew it.

I pointed out that I was in the process of applying for a mortgage and that giving the building society the impression that I went about writing cheques for money I didn't have wasn't going to endear me to them or enhance the chances of getting a mortgage. I further pointed out, and this is the relevant bit () that I had a contractual arrangement with the bank, and that included them paying cheques I wrote provided I had adequate funds, which I clearly and by some substantial margin, did have.

I told the bank I wanted :-

- the money paid ASAP
- the bank to write to the B.Soc explaining that the error was theirs, not mine.
- the bank to credit the amount of lost interest on the sum paid for the several weeks it took to sort out
- I told them what my time sorting it out cost (£30 IIRC) and I wanted that, too
- I wanted a copy of the letter explaining the error that the bank sent to the B.Soc.

I got all of the above .... and an ex gratia payment (£100 IIRC) for the embarrassment and inconvenience caused.

[Saracen]

I have an agreed overdraft in place of twice my monthly net salary.

Sensible move.

I never, ever, ever go into the second half of it. Thats just their in case my mortgage company try to screw things up again.

Good precaution .... and sound financial planning/precaution-taking.

its free, because i don't use it.

Indeed.

An overdraft is for temporary borrowing only, you shouldn't be living in it, and if you are then the bank should punish you.

I'm not sure "punish" is the word I'd use, but if you utilise a facility or service, it's reasonable to expect to pay for it ... one way or another.