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thefinalbear

How Bank Penalty Charges Are Killing The Economy.

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I think I've commented about this before but I think its even more important now that the credit crisis seems to be getting worse.

A poster on this forum comented the other day that he was standing in a bank queue an the person in front of him spent half an hour arguing with the bank cashier that he was getting charged £35 a day for being overdrawn.

This has actually happened to me on numerous occasions over the last six months.

And its terrible.......the banks are actually penalising people FOR HAVING NO MOMEY. If you think about it rationally it is absolutely bonkers. If someone is overdrawn and bouncing direct debits etc.....charging them £35 per bounced direct debit and £35 for every day that they are overdrawn is likely to send them into insolvency.

There was a time when banks actually protected your assets. No longer.

----- How does this affect house prices?

Every £35 that is taken out of someones account to feed to banks habit of illegally taking client funds is £35 that cannot now be spent in the shops, supporting retail spending, proping up commercial property etc etc.....

It is £35 that can't pay the gas, electric, mobile phone or SKY bill.

It is £35 for discretionary spending removed from the economy to shore up banks balance sheets.

It is £35 that can't pay the credit bill - sending billions more in paper to default.

And is is £35 that cant pay the rent, mortgage or council tax.

The Office Of Fair Trading took matter under its wing 8 months ago and has managed to drag the court case out so long that most people currently getting charges (2 million people by the way) will probablyt be insolvent by the time it is over.

An immediate stop to these charges (which are immoral and illegal IMHO) would have the duel affect of shoring up the balance sheets of REAL PEOPLE as opposed to monolithic financial institutions. And it would introduce more spending into the economy with immediate effect.

If you read the FSA principle of business these charges are actually breaking most of them:

http://www.fsa.gov.uk/Pages/Library/Commun.../1999/099.shtml

THe FSA has the power to IMMEDIATELY rule these charges illegal and refund them - thus introducing billions of pounds back to customers (money that was stolen from them)........

And Britain may have a small chance of fighting the credit crunch..........but will the FSA listen.................or are they fidling while Rome burns?

I woul be especially interested to hear what other posters think.

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I've been overdrawn occasionally, but rarely, and for the last 20 years, have an overdraft facility if needed. Tiny interest payments of a few pence.

Overdraft facilities are available for almost everyone, unless they have poor credit history in which case they should be even more careful.

I have very little sympathy for anyone who has to pay charges unless it is due to a payment failing to go in from a 3rd party. However, thus would be mitigation only, you DID go o/d.

I think people should be aware they are being done a favour for going o/d, the bank has honoured a d/d or allowed you to draw money that YOU DO NOT HAVE. In Portugal, you bounce a cheque, they close your a/c. In Spain, you can't GO overdrawn without prior arrangement. France is alos punitive, I believe but have no firm knowledge.

If there were no o/d charges (although the level of them is another issue <_< ), I expect we would have to return to the 1970s and early 1980s where current accounts were NOT free and you paid for d/d and s/o.

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I think that there is corruption and the court case is a large cover up where the result is already known.

What are the chances of a court at the end of this saying ok banks you have to pay everyone back their charges. We are talking billions of pounds.

The court case was an excuse to do what they really wanted to do and that was suspend all the claims as it was getting heavier on the banks.

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And its terrible.......the banks are actually penalising people FOR HAVING NO MOMEY. If you think about it rationally it is absolutely bonkers. If someone is overdrawn and bouncing direct debits etc.....charging them £35 per bounced direct debit and £35 for every day that they are overdrawn is likely to send them into insolvency.

No they're not. They're penalising people who spend money they don't have. If you have £0.00 in your account, you won't get charged.

Simple solution - don't spend what you don't have !!!

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I've been overdrawn occasionally, but rarely, and for the last 20 years, have an overdraft facility if needed. Tiny interest payments of a few pence.

Overdraft facilities are available for almost everyone, unless they have poor credit history in which case they should be even more careful.

I have very little sympathy for anyone who has to pay charges unless it is due to a payment failing to go in from a 3rd party. However, thus would be mitigation only, you DID go o/d.

I think people should be aware they are being done a favour for going o/d, the bank has honoured a d/d or allowed you to draw money that YOU DO NOT HAVE. In Portugal, you bounce a cheque, they close your a/c. In Spain, you can't GO overdrawn without prior arrangement. France is alos punitive, I believe but have no firm knowledge.

If there were no o/d charges (although the level of them is another issue <_< ), I expect we would have to return to the 1970s and early 1980s where current accounts were NOT free and you paid for d/d and s/o.

The name is misleading banks also charge when the payments are blocked.

Example overdraft limit £200

Balance minus £189

Available balance £11

Sky try to take £16 via direct debit.

Direct debit bounces due to insufficient funds and customer gets notified of £35 charge in the post.

Thats pretty much how my bank operates.

The £35 is not taken straight away however usually at least 1 month notice is given, on the occasions where I have been in very har times in the past and struggled the bank have usually but not always waived the charges when I asked and on one particular occasion where I was really in trouble they gave me a temp overdraft increase to stop cascading charges. (at that time what you said was happening payments were been cleared but to themselves loan payments)

We all know some people are plain irresponsible with money and get these charges from carelessness but others are just vulnerable and in bad situations, direct debits have been very hyped up as a good way of paying bills so people have changed from manually paying bills when they can afford it to choosing an automated paying service which has the downside of requiring you to have funds on the date it pays. People who are plainly irresponsible should be punished some way by the banks but the charges are clearly profiteable and hitting vulnerable people the most.

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The OP states that the person is being charged £35 per day for being o/d. This is probably made up mostly of interest on the amount owed, which must be a fair amount!

Although there is an initial charge for the infamous overcharged 'letter', there is not usually a charge EVERY DAY for being o/d, is there? Stand to be corrected.

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How bad will the credit crunch become if the banks are forced to paid back the billions pounds from their balance sheet. I would expect them to increase their lending rates to cover the difference. Give in one hand and take back in the other. You can't win.

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I have very little sympathy for anyone who has to pay charges unless it is due to a payment failing to go in from a 3rd party. However, thus would be mitigation only, you DID go o/d.

I think people should be aware they are being done a favour for going o/d, the bank has honoured a d/d or allowed you to draw money that YOU DO NOT HAVE. In Portugal, you bounce a cheque, they close your a/c. In Spain, you can't GO overdrawn without prior arrangement. France is alos punitive, I believe but have no firm knowledge.

If there were no o/d charges (although the level of them is another issue <_< ), I expect we would have to return to the 1970s and early 1980s where current accounts were NOT free and you paid for d/d and s/o.

I have a € account in France - if you go o/d they can charge UP TO €250 penalty and put very punitive restrictions on your account - basically if you can't balance your account they can (and do) close the account permanently and ask you to find another banker...

I've gone o/d a couple of times, but as I get on very well with the bank manager, he simply moves funds from my deposit account to cover any shortfall.

On a slighly different note, the way they calculated the mortgage we could get was based purely on a % of NET income. From memory I think it was 33%. when I asked him why the figure wasn't higher, he said...

"but why on earth would you want to pay more than 33% on housing - how will you enjoy your life..." Quite prophetic really when you look at the standard of living many indebted homeowners have in the UK.

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I once got a high street bank to drop £800 worth of these charges against my brother 10 or so years ago.

I argued that the bank had entered him into numerous one-party credit agreements without making any effort to contact him to see if he wanted the cheques drawn upon. Because it was entirely at the bank's discretion whether to honour the cheques or not, it was, in effect, an authorised overdraft item because they could have turned it down.

It worked. To this day, I wonder if my argument had any legal basis because they backed down completely without any quibbling.

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We all know some people are plain irresponsible with money and get these charges from carelessness but others are just vulnerable and in bad situations, direct debits have been very hyped up as a good way of paying bills so people have changed from manually paying bills when they can afford it to choosing an automated paying service which has the downside of requiring you to have funds on the date it pays. People who are plainly irresponsible should be punished some way by the banks but the charges are clearly profiteable and hitting vulnerable people the most.

This I agree with. As I said, the actual charges are iffy, £30+ to tell you you're o/d is excessive. In a way, I agree with the court case's point that charges are excessive but the way it is reported often suggests that some claimants are asking for the return of ALL charges. There has to be a down side to spending money that is not in your a/c.

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think people should be aware they are being done a favour for going o/d, the bank has honoured a d/d or allowed you to draw money that YOU DO NOT HAVE.

I see what you are saying but it dosent actually work this way.........if you have £0 in your account and a direct debit comes due the bank will:

A: Not pay the direct debit

B: Charge you for the privilage of not paying the bill.

These charges often hit the poo, vulnerable and elderly the most. These are people for whom 2 charges (at £70) might be their ENTIRE weekly income.

Given that the standard of financial education in the country is so lacking I find it discusting that a Loabour governemnt would allow it to continue.

It is hardly surprising that levels of trust in banks are at an all time low if they can legally plunder your account.

It is all very well telling people that they should 'monitor their acount' - but what of the people who dont have interent access?

We should trust banks to protect assests. Not grab the at every possible oppertunity.

What is even more shocking is that 6 years ago these charges might have been a fiver - now they can be up to £45 a time. Per item, per day.......those levels of charges could clear anyone out in short order.

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I haven't got a problem with banks charging penalty when you exceed your O/D. I have one and use it occasionally (especially when I moved to a new job and the expenses/refunds took a while to get even), but went nowhere near the O/D limit so no problem.

I'd rather have a penalty system in place than having to pay for my current account like I used to do in Italy (100€plus per year)

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It is impossible to go overdrawn with cash, no direct debits and no plastic.

Which is why the banksters will do everything they can to ensure as many people as possible use automated transactions.

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I'd rather have a penalty system in place than having to pay for my current account like I used to do in Italy (100€plus per year)

Tel that to the OAP's and single Mums paying £800 because they go overdrawn every once in a while. Given that the banks need our cash juts to stay in business you do not necessarily need them to charge at all - if they do you can switch - and surely it is better to pay a clear fee that have the poorest people in society subsidising the ones who can disiper the rules.

Edited by thefinalbear

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Thing I hate is the way credit card companies deliberately obfuscate how much you have to pay to pay off the amount in full each month. Amex for example highlight the 'minimum payment' box but not the 'closing Balance' box. Then if you pay off even a penny less than the balance, they charge interest on the full balance rather than the difference. They don't give you the ability to pay off in full by automatic direct debit either. Oh and the other sneaky thing they do is make the balance due just before pay day.

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People who berate and pour scorn on "feckless innumerate" individuals, who become overdrawn, really get my goat. It can happen to anyone.

From a genuine error, to a third party mistake, or ultimately a job loss or other life changing situation, you may one day find yourselves at the mercy of the banks, and let me tell you, the banks have no mercy.

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Tel that to the OAP's and single Mums paying £800 because they go overdrawn every once in a while. Given that the banks need our cash juts to stay in business you do not necessarily need them to charge at all - if they do you can switch - and surely it is better to pay a clear fee that have the poorest people in society subsidising the ones who can disiper the rules.

The charge for going overdrawn by a trivial amount should include only the administrative costs (negligible since i doubt if someone goes overdrawn by less than 50 pounds it needs to be manually approved), interest on the borrowed amount, and some small penalty. Current charges are way above that. Its plain profiteering.

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This subject has been debated many times before on hpc, but the subject of how you measure the damage done to the economy & individuals health / mental health through the stress of a spiral of bank charges is a most interesting one imo.

My view is that I understand it costs the bank around £1 to bounce a payment & send letter, so a charge of £5, a 400% profit

would seem excessive, but perhaps a fair disincentive to those not keeping finances in order. It's still approx. 6-10% chunk out of an unemployed persons benefit though.

How anyone can argue anything above a £5 charge is imo, a narcissist, sadist, bank shareholder or has fallen for the bank propaganda of 'we will all have to pay for a bank account' (likely untrue in a competitive market). IS £400% profit not enough?

We should be charged a monthly fee as in most the rest of the world. The smoke & mirrors approach is just another part of the horrific deception tactics used by the banks that has got us into this bubble mess. It is quite frankly a mind f..k & the public need protecting from it.

A classic case of 'capitalism out of control'.

I've just had a frustrating time trying to find the latest news about the bank charge court case & if you can still sue them. I went to the main campaign site http://www.consumeractiongroup.co.uk/

and the Fsa at http://www.fsa.gov.uk/ to complain about the fact the Halifax do not show the fsa address in their complaints list but could find either.

Does anyone know the latest?, perhaps http://www.Moneysavingexpert.com have some news.

Edit: this the main bank charge reclaim guide page at mse, http://www.moneysavingexpert.com/reclaim/o...nk-charges#what

but can't see the latest as I understood that the suing through the courts had been suspended due to the fsa v banks court case & as yet unannounced ruling (i may be wrong though).

Edited by Saving For a Space Ship

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Does anyone know the latest,

2 million claims stuck in the system........all on hold pending the outcome of the test case, decision to be reached before June this year and then the banks will appeal giving them until early 2009.........

.....discusting really that they are allowed to continue charging while the egality of the charges is in question.

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2 million claims stuck in the system........all on hold pending the outcome of the test case, decision to be reached before June this year and then the banks will appeal giving them until early 2009.........

.....discusting really that they are allowed to continue charging while the egality of the charges is in question.

Thanks, that what I thought.

I agree that it is appalling, and makes the outcome seem most likely bleak for the consumer.

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From the last day of the case.

Day 14 final day

Justice Andrew Smith began by addressing the documents left on his desk by the various parties and in particular one by the FSA.

Although he didn’t reveal the contents of it, the document appeared to relate to the decision by the judge not to take historical terms and conditions into account during the hearing. The judge took great exception to the FSA’s view this was because the court didn’t have enough time to include anything other than current T&Cs.

The judge reminded the FSA that he had indeed offered to make time available but the issue was simply ‘’unmanageable’’ to consider and that historical T&Cs were not part of the preliminary issues. He said, referring to the FSA, ‘’it is unfortunate that this has been distorted’’ and ‘’frankly I don’t think it should be put in any public document’’. The FSA’s legal representative stood up and meekly offered an apology for her ‘’misunderstanding’’.

Mr Vos for Nationwide began his reply saying that the charges and interest were in exchange for both a package of services and ‘’obviously and naturally the price for an overdraft’’. He said that Nationwide’s view that their contracts change when a customer goes from credit to debit ‘’had not been responded to by the OFT’’. He countered the OFT’s contention that contracts should be judged in the view of a typical consumer by saying that there were 2 types of typical consumer, ‘’a credit consumer and a debit consumer’’. The judge suggested that for a customer who regularly goes in to debit before pay day, changing his contract monthly ‘’may be pushing it too far’’ when they ‘’just crossed the debit line’’.

On the subject of the order in which same day payments are processed Vos said that many incoming payments were ‘’outside the banks control’’. He said that the bank have complete discretion as to the order payments processed and the judge asked him what he thought of Brian Doctor’s argument that banking law procedure indicated that the smallest payment should be processed first. Vos conceded ‘’there is some authority on that.’’

Vos claimed that the OFT had accepted that payment instructions were not deemed requests but the judge said that ‘’when one charge triggers another, we move closer in to the world of deeming’’. All Vos could say was ‘’I don’t make any comment on that’’.

The judge asked him if the order of payments were ‘’too complicated to state in the contract?’’ Vos said he’d prefer to use ‘’too confusing’’ but Nationwide’s contracts did give some clear guidance. ‘’Yes but not within a day’’ said the judge.

Brian Doctor covered much of the same ground as before. He spoke on the ‘seven uncertaities’ and the judge seemed to disagree with several of his points.

Doctor said that some of the banks T&Cs were contradictory in saying that the balance of the account would be taken judged at the time when payment instructions were considered but that expected incoming payments ‘may’ be taken into account and making it difficult for the customer to know what balance was being considered. He quoted Nationwide’s contract that stated internal transfers made before 5pm would be credited to the account but made no mention of external credits but the judge said that if no obligation was in the contract, what actually happens is irrelevant.

At 10.30 sharp the judge thanked everyone and got up to leave for the last time. But before he could straighten his back the bank’s QCs piled in with questions about his judgement. Robin Dicker popped the big question of when the judge expected to reach his judgement., ‘’I have no idea at all’’ the judge said.

Malek then said that as the case had attracted such interest, how would the judge manage the risk of a breech of confidentiality between giving his written summary and handing down his judgement and said that even body language could give the game away. Justice Smith said he understood the potential seriousness of a leak and would be considering restricting his summary to 2 counsel per party but Brian Doctor protested at the imbalance of 16 members of the defence versus 2 of the OFT and the judge said he would consider it. Earlier Thanki had asked the judge for more time between his written summary and the judgement so the banks could prepare for the inevitable deluge of calls on the status of claims.

The judge suggested that in consideration of his judgement, it may be that additional information and clarification could be required from both parties and rather than doing this in writing it may be sensible to hold a ‘’discrete hearing’’.

The banks also wanted to know about how his decision on the current terms and conditions would effect historical T&Cs which were largely the subject of current litigation. Justice Smith said that at this stage there was ‘’every indication that my findings on current T&Cs would translate to many historical contracts in very short order, possibly within a month’’. This meant that the principles he reaches on current T&Cs could be applied to most historical T&Cs by the county courts and presumably this would necessitate the amending particulars of claim and defences that are currently stayed.

The Seven Deadly Sins of The Eight Deadly Sinners

These are the 7 issues on plain intelligible language that the OFT has with the banks.

1. The qualifying of ’available funds’.

2. The qualifying time of ‘available funds’.

3. The order in which payments are processed.

4. The constitution of a ’deemed request’.

5. Uncertainties of the outcome of a ‘deemed request’.

6. The uncertainty of the scope of the relevant charges.

7. The uncertainty of the enforcement of the relevant charges.

It was notable that the banks somehow managed to grasp the concept of plain intelligible language during the course of the hearing on the very issues of PI L itself - even though this didn’t seem to apply to their terms and conditions. For the first few days it was ‘the seven deadly sins’, midway through the case it changed to ‘the seven ambiguities’ and at the end of the hearing it was referred to as ‘the seven uncertainties’ which is what the OFT called it in the first place.

It was also interesting to note the different terms each bank used for ‘unauthorised overdraft’. Depending on the bank it was ‘unplanned overdraft’, ‘instant overdraft’, ‘unarranged overdraft’ or simply good old fashioned ‘unauthorised overdraft’ which became the standard term used by all the banks, the OFT and the judge during the hearing. Though I can’t help thinking that the term ‘unauthorised’ doesn’t sit too comfortably with the banks pleadings that their charges are for the consideration and inevitable authorisation for an overdraft that is then classified as ‘unauthorised’.

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People who berate and pour scorn on "feckless innumerate" individuals, who become overdrawn, really get my goat. It can happen to anyone.

But some of us have been there and done it and got ourselves out of it without whinging like a baby.

Your debt your problem.

Live within your means. Live more within your means. Save money. Don't expect to live the life of riley at anyone else's expense.

Did Sky TV take you overdrawn? When has SKY TV been a life essential?

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