Tuesday, Jun 13, 2006

A&L getting tough with those that take action on excessive overdraft charges

Independent: A&L closes accounts of dissident customers

The battle between banks and customers over inflated overdraft charges turned still more acrimonious last week after it emerged that Alliance & Leicester was routinely closing the accounts of those taking legal action.

Posted by webmaster @ 10:20 AM (510 views)
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4 Comments

1. Surfgatinho said...

I don't see the problem. If you go overdrawn you pay the charge. It's simple, everybody knows it so what's the problem. As has been pointed out in other articles, if the banks don't make their money this way then they will start charging more for routine banking.

Tuesday, June 13, 2006 11:21AM Report Comment
 

2. D'oh said...

The problem is that when one is on a low income these penalty charges can lead to an ever deepening pit of debt that one cannot climb out of. I have a friend who is on 14000 per year in the south-east, and it doesn't take much to lead to bank charges of staggering proportions. Moreover, these charges are often not levied until the month after the transgression. It never occurred to me just how iniquitous these charges were until I saw them in action on someone I knew.

So, for example, you go over drawn by a few pounds one month and don't notice, toward the end of the next month when one is close to the overdraft limit again 25 is unexpectedly removed from your account causing you to be overdrawn again and leading to penalty charges next month, followed by a spate of check bounces at 30 each meaning that there is no way one is going to be able to stay within the limit the following month...so you put some stuff on a credit card to avoid the charges...and it goes from there.

It's not a problem for those of use who have incomes at the level where 20 here or there is not a problem, but there are a lot of low paid workers who have very little discretionary income after they have paid rent, bills and transport costs. But for some, all it takes is something to go wrong with their E-reg car (necessasry to get to a work place with no public transport links) and "just getting by" can turn into "financial hell".

Banks would not need to charge regular account holders for managing their accounts. What does one get for a monthly average current account balance of 1000? 12 statements a year in the post plus a whole stack of advertising urging one to take out personal credit card loans at ursorious rates. High street banks pay more or less no interest on a current account (so that's 50 a year in their pockets) and they charge sellers a fixed fee plus non-trvial percentage every time one uses a debit card for a transaction (i.e. exchange of a few electrons and writing a few bytes to a hard disk and magnetic tape somewhere.) They do quite well out of my patronage thank you very much..

Tuesday, June 13, 2006 12:12PM Report Comment
 

3. uncle tom said...

The charges do encourage a little responsibility. Once upon a time, bouncing cheques were tiresomely frequent - then the banks starting penalising those who wrote cheques, but without the funds to cover them, and the problem is now very much less common.

However, not everything the banks make penalty charges for is fair and reasonable - In most cases, there ought to be a caution letter only for the first offence.

This initiative is one in the eye for Which?, who have been rather naively encouraging people to sue their banks.

Tuesday, June 13, 2006 02:12PM Report Comment
 

4. Retiredbanker said...

D'oh is quite correct, these charges can soon push a low earner or small business to the wall.

I have been retired for over 12 years so I cannot fully recollect the exact amounts debited, but in addition to the
20/25 cheque return ( or unpaid direct debit/ recalled standing order ) fee, a similar amount would also debited to the
customer for the letter advising them of this.
Also the bank would initially ask for the cheque to be represented for payment and if funds were still not available
to cover the cheque upon representation then it would be returned marked "refer to drawer", and a further set of fees
debited.
This created a downward spiral, and soon 25% or more of the customer's monthly salary credit would be lost to
bank charges. Additionally the bank charges taken quarterly would be "loaded" to to reflect the "nuisance element"
of the account.
I used to advise such customers to open a deposit account with a building society for receipt of their salary credit
and to withdraw cash as needed, as this way they could regain control of their financial affairs.

Tuesday, June 13, 2006 05:49PM Report Comment
 

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