Thursday, Apr 24, 2008
Oh dear, more woes for the Banks
BBC: Banks lose overdraft charges case
The UK's biggest banks have lost a test case about overdraft charges. A judge has decided that the Office of Fair Trading (OFT) can apply consumer contract regulations to decide if bank overdraft charges are fair or not. But Mr Justice Andrew Smith said the judgement did not necessarily mean the charges are unfair. Further hearings are expected which may delay the cases of thousands of claimants trying to reclaim their charges arguing they are too high.
Posted by jack c @ 12:04 PM (678 views) Add Comment
14 Comments
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1. renting2 said...
Adds to pressure for banks to keep their own rates high to build up the required surplus to pay it all back.
2. The Haunted said...
This is really going to hurt the banks and they will have to factor it into their already large losses.
3. paul said...
This will be go down in history as being the beginning of the end of free current accounts.
4. jack c said...
Paul, agreed - the Banks will look to introduce service charges etc. to compensate
Lloyds are constantly asking that I upgrade my account - but the monthly cost isnt (IMO) value for money - after all I just need to to pay money in and take money out
5. hpwatcher said...
Lloyds are constantly asking that I upgrade my account - but the monthly cost isnt (IMO) value for money - after all I just need to to pay money in and take money out
Because of this judgement, banks will now start charging for using all of their accounts....they need to get the money back somehow. In future there will probably be no such thing as a free overdraft facility.
6. d'oh said...
We must also remember that whilst banking may appear to be free for us, retailers are charged every time we use our cards, for what must cost the banks 0.000001p per transaction.
7. micasasucasa said...
This is a bit annoying. I think the banks should be able to charge what they like - it's a service-based industry and you have to sign the T&Cs when you open an account. "Fairness" shouldn't come into it, if it's based upon costs. It's not "fair" that mobile handsets are subsidised by other phone contract charges, but that's how the industry works. Hopefully free bank accounts will stay and the banks will be able to milk the feckless some other way.
8. sid public said...
"Hopefully free bank accounts will stay and the banks will be able to milk the feckless some other way"
Nice way of thinking micasasucasa.... how about we impose higher taxes on the lowest earners and make house prices unaffordable except for those who are extremely privileged?
... you're not a Labour advisor by any chance are you?!
9. montesquieu said...
@ micasasucasa
the whole point here is that banks are not allowed to charge penalty fees (which for some have run into thousands due to snowball effect of fees pushing people into larger unauthorised debt, which then gain more fees and so on).
They are only legally allowed to charge what's a fair fee for the service rendered (eg bouncing a cheque, writing a letter and so on). The banks have been breaking the law. (unfortunately this doesn't apply to credit cards).
About 10 years ago these charges put my brother out of a perfectly viable business during a few months of bad cashflow, due to several large customers he'd done work for not paying bills all at once. His P&L was fine and he was eventually paid for most of the work, but snowballing bank charges put him out of business in a matter of months, he ran up quite a few thousand pounds which he was never able to get back.
This sunk him in the end as, because he was never able to get back to zero, and the bank (because of his sudden 'bad record') wouldn't authorise an overdraft or loan, he ended up just progressively drowing in charges.
What exactly is 'fair' about that? We have regulation to stop banks being a law unto themselves (sadly it has taken many years to bring them to account).
10. Fed Up said...
This is just another way by which reckless borrowers will be subsidised by everyone else via bank charges.
11. scandinavian pessimist said...
paul, jack,
This is NOT the end of "free" banking. Whether or not the banks can charge us for banking depends not only on their expenses but also very much on the market conditions. Some banks may try to impose a charge but if many customers decide to leave for another bank which does not charge them, the situation changes very quickly and the banks may find that they will have to find another way to make money or simply try and reduce their expenses. THE MARKET decides if it is possible, NOT the banks. After all, if charging a small fee for bakning had been a good way of making money, some banks would already have done so.
12. Ijjhall said...
Montesquei
You are wrong on credit cards. They are illegal too and thousands have have excess charges refunded - check out moneysavingexpert.com for details of how. I followed it and got mine back..
13. Smaller said...
I very much agree with micasasucasa.
This is just another case whereby those of us prudent enough not to go over our limits knowing that we'd pay charges will be made to pay one way or another for the financially illiterate and careless. Sound familiar hpc'ers? I can't help thinking that this is analogous to homeowners being bailed out of their mortgage (or the uninsuranced after last year's floods) by the government. It seems that if you're in the majority i.e. spend more than you earn, and don't consider the risks, someone will bail you out if you whinge enough. Heads I win, tails you lose.. This is just wrong. Take responsibilty.
14. Ijjhall said...
smaller said
There are people of course on very tight incomes who go over a bit on essentials get hit with high charges that puts them on the back foot from the start of the next month incurring further deeper charges and on it goes a vicious circle. It is not all about reckless spenders and the banks have profited illegally. That is what this test case has tried to establish with today an important first step.