The "Free" Banking Myth

Credit to Andrew Bailey, soon to become chief regulator of the financial service industry, for admitting to what everyone actually knows about banks namely that "free" banking is "a dangerous myth".

It is a pity that no one in the financial services industry has ever stated this before.

This does of course mean that in the near future the pretence of "free" banking will be removed and banks, as I have warned many times before, will start to openly charge for their "services".

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Lloyds Ends 2010 On A "High"

Lloyds ended 2010 in much the same "spirit" as it besported itself during the year, by mistakenly double charging some 200,000 of its credit/debit card customers for transactions effectuated on New Year's Eve.

Well done lads!

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Banks Win

One way or the other the banks were going to win the case for charging "excess" fees for overdrafts.

In the event that they had lost their appeal at the Supreme Court, they most certainly would have started charging for all bank accounts (irrespective of whether they were in credit or not).

As it is, millions of bank customers hoping to be refunded overdraft charges have been dealt a major blow by a Supreme Court judgement.

The court has overturned earlier court rulings that allowed the Office of Fair Trading to investigate the fairness of charges for unauthorised overdrafts.

Notwithstanding this result, I guarantee that banks will start to introduce account charges (one way or another).

I would make one other observation, the banks claim that their charges are for the risk and effort taken by them wrt supplying an unauthorised overdraft.

Fair enough!

However, has not the British taxpayer provided the banks with billions in the form of an unauthorised overdraft in order to bailout the banks as a result of their gross mismanagement of their businesses?

Therefore does not the British taxpayer have the right to levy charges (high ones) against the banks?

What goes around comes around!

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Ripping Off The Over Fifties

The Times reports that building societies are ripping off the over fifties wrt interest rates offered on ISA accounts.

As from yesterday anyone over 50 will be able to invest an extra £1,500 into their cash Isas, as their allowance will rise from £3,600 to £5,100.

However, "institutions have launched a wealth of accounts to attract older savers' cash — but some are offering poorer rates than their 'mainstream' deals".

Fair comment.

However, as we know, the financial services industry does not discriminate when it comes to ripping people off. The British consumer has been, and continues to be, ripped off by the financial services industry viz:

- bank charges
- PPI
- endowment mortgages
- interest rates
- mortgage charges etc etc

In the eyes of the financial services industry we are all "prostrate cows" ready for slaughter.

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RBS Cuts Charges

RBS (the taxpayer funded bank) and its NatWest subsidiary have, admittedly by implication, admitted what everyone knew all along, namely that bank charges for bounced cheques etc are simple profiteering.

RBS and Natwest have announced that they are cutting the fees they charge customers who go overdrawn without agreement, or exceed their overdraft limit.

As from 1 October, charges for a "bounced" cheque, direct debit or standing order will fall to £5, down from £38.

Other charges such as maintenance charges for overdrawn accounts and the paid referral fee will also be reduced.

Clearly, were the administration costs to the banks really that high then these cuts would never have been made.

Currently eight lenders are challenging the right of the Office of Fair Trading to decide if overdraft charges are fair or not, in the face of a million claims by hapless bank customers for the return of their unauthorised overdraft charges.

As to whether other banks follow suit remains to be seen.

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The Banking Rip Off

As I have noted before, the financial services industry in the UK has an unfailing knack for digging itself deeper into its own shit.

Not content with foisting endowment mortgages, PPI, excess credit card rates, bank charges and other insults on its hapless customers it now seeks to milk them further by "imaginative" and outrageous profiteering charges on mortgage arrears.

Many thousands of homebuyers, many of whom are unemployed, face profiteering penalty charges on top of their regular monthly mortgage repayments.

The Council of Mortgage Lenders (CML) report that the number of mortgages in arrears by three months or more has reached 270,400 (compared with 152,700 at the end of the second quarter of 2008).

Moneysupermarket.com report that Lloyds Group is charging £206 for repayments three months or more in arrears.

GMAC and Abbey charge penalties of £50 and £40, respectively, when the borrower is only one month in arrears.

Halifax charges £35 for every call/letter wrt mortgage arrears, and then has the barefaced cheek to charge £100 for debt advice.

The FSA has a Code of Conduct that requires that lenders treat customers fairly sympathetically.

Evidently the banks haven't read that code, or simply do not care about it.

The Treasury Select Committee is not impressed with either the banks, or the hapless and hopeless FSA. It has attacked the FSA for sitting on its hands.

Britain's financial services industry is rotten to its core.

Until the FSA is expunged from history, and replaced with a more pro active assertive regulatory body, the hapless British consumer can only expect more of the same and continue to be ripped off.

Those who currently are enjoying the fruits of their profiteering should bear in mind the wise adage:

"What goes around, comes around".

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FSA Fails Again

The Financial Services Authority (FSA) has once again demonstrated to all and sundry that its role is to protect its paymasters in the financial services industry, rather than champion an efficient, open, transparent and honest financial services industry for hapless consumers and investors.

The FSA has announced that it is extending the waiver that allows banks not to pay out on claims for compensation for overcharging on unauthorised borrowing.

The waiver was introduced in July 2007, when the Office of Fair Trading (OFT) began a court action to prove that high charges for unauthorised borrowing are unfair. It was due to expire next Monday. However, the court case is still ongoing and the FSA has said that it will allow banks to put claims on hold for a further six months.

While the waiver is in place the Financial Ombudsman Service will not proceed with complaints, and cases in the county courts have also been put on hold.

Another nail in the coffin of the FSA's reputation.

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The Bankers Strike Back

The major high street banks, never fearful of damaging their already trashed reputations, will go to the Court of Appeal today in a bid to overturn the High Court ruling that unauthorised overdraft charges are unlawful.

The banks lodging the appeal include; Abbey, Barclays, Clydesdale, HBOS, HSBC, Lloyds TSB, Nationwide and the Royal Bank of Scotland.

Whatever the outcome, not expected to be decided for quite some time, the banks will ensure that they make money out of their customers one way or another. In the event they lose the appeal, they will simply abolish free current accounts.

It's as simple as that!

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The Great PPI Rip Off

Those of you who have been screwed by your bank or other financial organ into taking out an unnecessary and expensive payment protection insurance (PPI) policy should read this article in The Times, which shows that you can claim back up to £24K.

Quote:

"The insurance, which is bought by one in four people and is supposed to cover your mortgage or loan repayments if you are unable to work, is described as one of the last big rip-offs in the industry after endowment mis-selling and overdraft charges.

Banks often add the cover to your loan automatically, with many borrowers never realising they have it. Even when they do, most consumers are unaware of the extent of overcharging.

Mortgage cover from Halifax, for example, would add £103 a month to the cost of a typical £200,000 home loan, or £2,472 over two years. The cheapest cover on the market can cost two-thirds less."

However, as I have noted before, banks are not charities. The money that they repay to customers in the form of compensation will be made up for elsewhere, via increased rates on loans and mortgages.

They simply do not care about their reputations, or their customers.

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Record Number of Disputes

The Financial Ombudsman Service (FOS) has published its annual review for 2007/08, which shows that there has been a record number of enquiries and complaints about the quality of the financial services industry in Britain.

In the year ended 2008, the FOS handled a record 794,648 consumer enquiries and 123,089 new complaints (a 30% annual increase).

The number of mortgage and banking disputes tripled and insurance disputes doubled, whilst complaints about mortgage endowments fell by 70%.

The FOS settled 99,699 disputes.

Sir Christopher Kelly, chairman of the ombudsman service, said:

"This time last year we had hoped we were starting to see a downward trend in complaint numbers for the first time. But instead, events during the year have led to the ombudsman service receiving record numbers of new cases.

The sudden surges in banking and insurance disputes this year have meant that predicting, managing and dealing with complaint volumes has been more of a challenge for us organisationally than ever before."

Unsurprisingly there was a ten-fold increase in complaints about charges on current accounts, and a six-fold increase in complaints about payment protection insurance (PPI).

The rising number of complaints shows that the financial services industry in Britain has its work cut out if it is going to improve its image, reputation and quality.

The question is, does the financial services industry really care about quality or its reputation?

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Banks To Appeal

Eight leading street banks, including Barclays, HSBC and Royal Bank of Scotland, have sought permission to appeal against last month's ruling which gave the Office of Fair Trading (OFT) legal jurisdiction to determine whether bank charges are unfair.

If permission is granted bank customers, who have submitted claims for "rip off" fees, may have to wait years to receive their compensation.

Needless to say, there have been accusations that the banks are using this appeal to delay repaying customers.

Phil Jones of Which?, is quoted in The Times:

"The banks should stop stringing this out. The charges are seen as unfair by consumers so they should do the decent thing and pay compensation to those who have made a claim and reduce the fees to a fair level."

Whatever the outcome, one thing is for certain, the banks will find other ways to charge their customers. The most likely change will be an introduction of charges on all current accounts, whether they are in credit or not.

Banks are not charities!

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Repossessions Rise

Home repossessions, having risen by 16% in the first quarter of this year, are now nearing the levels of the recession of the early 1990s.

The Ministry of Justice states that 38,688 mortgage possession claims were issued from January to March 2008, compared with 33,715 for the first quarter of 2007.

In the third quarter of 1990 repossessions were 37,498.

As the economic conditions worsen (eg rising food and fuel bills, rising taxes and a credit drought etc) so too will the number of repossessions.

The Government, in a lack luster attempt to try to show that they are "in control", have yet again delayed their absurd and costly Hips implementation to the end of the year.

The fact that the government thinks that this will materially help matters shows how completely out of touch and out of the driving seat the government really is.

Alistair Darling, playing King Canute, pleaded with the chief executives of the six biggest UK banks yesterday to do everything that they can to prevent borrowers from losing their homes.

The crisis will pass, but it will not be this government's actions that resolve it.

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Banks Raise Fees

As I predicted, the banks will not accept the possibility of a cap to their overdraft charges.

As such they are raising the the monthly fees on accounts, by up to 20%, before the ruling by the Office of Fair Trading (OFT) that could cap overdraft charges.

The Times estimates that approximately 7 million customers will be adversely affected by this move.

Royal Bank of Scotland, NatWest and Lloyds TSB will all raise their fees on the "packaged" accounts (ie ones that offer "extras" such as insurance).

Needless to say, next in line will be the free current accounts currently offered by the banks.

As I have repeated, time and time again on this site, banks are not charitable institutions. Block their revenue stream in one direction, and they will find a way around that blockage.

However, quite why people sign up to the "packaged" accounts is a mystery to me; they offer no tangible value for money, most certainly not after this round of price increases.

Dump them!

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A Pyrrhic Victory!

Britain's banks lost their battle in the High Court yesterday over unauthorised overdraft charges.

Mr Justice Andrew Smith ruled in favour of the OFT, stating that it can apply consumer contract regulations to decide if bank overdraft charges are fair or not.

In summing up, Judge Smith said:

"I reject the banks' contention that the Relevant Terms (the bank terms being challenged by the OFT) are exempt from assessment as to fairness under the 1999 Regulations.

This does not mean that the Relevant Terms are necessarily to be regarded as unfair or that they are not binding on consumers under the Regulations.

Those are not questions for me to decide in this judgment."

The OFT can now decide if the charges are unfair and, if so, what a fair fee should be.

However, the banks will undoubtedly appeal.

Those who expect to see a compensation cheque dropping through their door, in the near future, had better not hold their breath.

The rest of us, who did not slip into unauthorised overdrafts, can expect the banks to introduce charges on our accounts in the future.

A Pyrrhic victory!

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Banks Face Defeat

In a rare piece of good news for the hard pressed indebted public, today the High Court will hand down judgement on whether or not the Office of Fair Trading (OFT) can rule that bank charges are unfair; it is expected that the ruling will go against the banks.

If the OFT wins, it is then expected to decide that bank charges are too high.

However, even if the OFT does win and make that call, the banks will find other ways to charge their long suffering customers. Most likely the banks will introduce a charge for all account holders.

In the event that the court decides that some terms and conditions are subject to fairness assessment, while others are not, there will have to be further hearings to decide the exact level of charges.

Suffice to say, whatever the outcome, the brand image of banks and other financial institutions is at an all time low.

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High Noon

Today marks high noon for the banks, as the the much vaunted court case begins that will determine the legality and fate of bank charges for unauthorised overdrafts.

The Office of Fair Trading (OFT) is seeking to prove that bank charges fall under the remit of consumer contracts regulations, which state that "penalty fees" must be proportionate to their cost. The banks claim that the charges, of £30 for bouncing a cheque or exceeding an overdraft limit, are not punitive and so do not fall under the terms of the act.

In the event that the OFT wins, it will begin a second case aiming to prove that fees levied on customers are too high because they exceed costs of £4 a transaction.

If the banks win, they will continue charging customers with impunity.

However, in a perverse twist, whatever the outcome of the case customers can still claim back late payment fees on credit cards of more than £12.

The banks going to court today are Abbey National, Barclays, Clydesdale, HBOS, HSBC, Lloyds TSB, Royal Bank of Scotland Group and the Nationwide Building Society. They have every reason to fight, as they make around £3.5BN per annum from these charges and stand to repay consumers £5BN if they lose.

However, whatever the outcome, you can be assured that the hapless consumer will be charged one way or another by the banks.

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Mortgage Lenders Beg For Help

The Council of Mortgage Lenders (CML) are begging the government to "urgently" support homeowners who are struggling to pay their mortgage, and restore confidence in the financial system.

CML's director general, Michael Coogan, spoke at the annual conference and said that increasing support for struggling mortgage borrowers is one of the key issues the government must face to encourage home ownership as confidence continues to falter.

Quote:

"The government needs to recognise and act to address the shortfalls in the safety net of state support for mortgage borrowers in most financial difficulty.

Waiting nine months for partial support is simply not good enough to help sustain home ownership."

The CML also noted that confidence in the mortgage market and wider financial system has been badly hit by the turmoil of recent months, and said that both lenders and the authorities must work to restore trust in the system.

Maybe so.

However, much of the confidence in the financial system has been eroded by the financial service providers themselves; viz:

-Excess bank charges
-Excess charges for credit and mortgage arrangement fees
-The endowment scandal
-Northern Rock
-PPI scandal
-Cold calling to sell unnecessary financial products and services
-Sub prime lending
-The self inflicted liquidity crisis etc

It is down to the financial service providers, who have destroyed the credibility of the financial services industry, to restore confidence in it.

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Crisis Has Further To Run

David Blanchflower, the Bank of England Monetary Policy Committee (MPC) member, has stated that credit crisis that is damaging the UK economy and housing market has further to run, and that banks' losses could be much greater than currently estimated.

Quote:

"There is still concern in the credit market."

In a less than cheery pre Christmas interview with the Birmingham Post, he indicated that worse is to come.

As such he is calling or an early interest rate cut, and is supported in that call by Sir John Gieve another member of the MPC. Given that the MPC consists of 9 members, it just requires 3 more to bring about a much needed reduction in rates.

The question is will they have the vision to do this?

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The PPI Scandal

The British financial services industry seems to have a death wish as far as it reputation with the consumer is concerned. Not content with foisting underperforming and useless endowment products on the unsuspecting public in the 1980's, it managed in more recent years to do the very same thing with PPI (Payment Protection Insurance) products.

The payback from this wanton mis-selling is now coming back to bite them.

Brunel Franklin, a claims specialist, has written to the Financial Services Authority (FSA) highlighting a number of serious problems in the PPI mis-selling sector, including what it believes is a deliberate statistical manipulation of the mis-selling figures by the PPI vendors.

According toe Brunel Franklin, Lloyds TSB and Welcome are some of the worst offenders and are offering gestures of goodwill across the board.

Anthony M. Sultan, managing director of Brunel Franklin said:

"We believe that vendors are using gestures of goodwill to mask the true scale of PPI mis-selling from the regulator. If the significant percentage of complaints are being dealt with as gestures of goodwill, how do we know that these are being declared to the FSA as complaints and showing up as incidences of mis-selling?

Lloyds TSB are pretending that there has been no mis-sale and no formal complaint, and are hoping to sweep thousands of complaints under the carpet under the guise of gestures of goodwill.

Our suspicion is that they are not being declared to the regulator and never appear in any FSA statistics on PPI mis-selling.

This mis-selling crisis may be bigger than endowment mis-selling in terms of the numbers of people affected and the total amount of compensation due, so it is perhaps not surprising that the vendors want to play it down in the hope that it will go away.

It will not go away and we are determined to get people the compensation they are entitled to."

As if endowments and PPI were not enough, the financial services industry also has "blood on its hands" wrt extortionate bank and credit card charges, credit refusals for people with good credit ratings, excess bonus payments to underperforming directors, excess management fees for underperforming investment funds and the destruction of Northern Rock.

Hardly a "stellar" performance so far!

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The Great Credit Card Con

Not content with their already lousy reputation, Banks and credit card companies in Britain are determined to dig a further grave for themselves and the British financial services industry.

Campaigners allege that banks are deliberately deceiving customers who try to reclaim default charges on their credit card bills. Banks have been telling courts to halt their cases, because of a separate decision affecting efforts to reclaim overdraft charges.

In April 2006, the Office of Fair Trading (OFT) said it would not challenge the legality of credit card default fees, so long as they were set at a level no higher than £12. Therefore many people are entitled to reclaim fees in excess of this amount.

Martin Lewis, of Moneysavingexpert.com, said

"Many banks are outrageously trying to apply the hold on bank charges reclaiming, to credit cards reclaiming, even though the Office of Fair Trading already sorted this out back in April 2006."

The British Bankers' Association deny this:

"This only applies to current accounts and should have no effect on credit card claims.

The Financial Services Authority is monitoring how this is working."

A somewhat lame excuse, as it attempts to pass responsibility to the FSA.

Is it any wonder people have lost faith in the financial services industry, and loath banks and credit card companies?

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