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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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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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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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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Bank Charges

As the date for the court appearance by eight banks, who will be taken to court in January by the Office of Fair Trading (OFT) for allegedly unfair bank charges, draws ever nearer; some banks are trying to show "some flexibility" in their approach to their customers.

Thisismoney reports that Lloyds will be the first bank to reduce its overdraft charges.

Quote:

"On November 2 Lloyds will introduce a monthly charge of £15 and a sliding scale of daily charges of between £6 and £20 instead of its previous daily charge of £30 for unauthorised overdrafts."

Whether this mollifies the OFT, or is the start of a price war between the banks, remains to be seen.

The list of shame includes; Lloyds, Abbey, Barclays, Clydesdale Bank, Natwest and its owner HBOS, HSBC, The Royal Bank of Scotland and Nationwide Building Society.

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Get Out of Jail Card

Congratulations to the Financial services Authority (FSA) for showing its true colours the other day, when it came down firmly in favour of the banks rather than the public in the ongoing row over excess bank charges.

The FSA has ruled that banks will not have to make any more refunds to disgruntled customers, re excess charges, until the court case initiated by the Office of Fair Trading (OFT) is heard next year.

The OFT is taking high street banks to court over the excess bank charges.

Commercial Court judge Mr Justice David Steel has ruled that the trial will take place on a date to be agreed, between January and the end of February 2008.

It is estimated that bank customers have been stung with over £1BN in overdraft charges so far this year.

Well done the FSA for the giving the banks a free "get out of jail card".

Cab anyone remind me as to whom the FSA is meant to work for again?

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Liars, Scammers and Bullies

'Britain's banks and building societies have lied to and threatened customers who complain about overdraft charges, the Government's financial regulator said.

The Financial Services Authority (FSA) has rebuked current account providers for making "false or misleading statements" to customers. The City watchdog said that some institutions had lied to account holders to deter them from reclaiming unauthorised overdraft charges.'

Source The Times

Says it all doesn't it?

The financial services industry in Britain truly has a most appalling reputation, one of its own making.

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Excess Charges Mass Hearing

Today will see a record number of people have their claims for the return of bank overdraft charges dealt with at Leeds Mercantile Court.

Around 200 cases have been scheduled to be heard, though some have been settled at the last minute.

Over the last 12 months there has been a surge in mass litigation, whereby angry bank customers have sued their banks for the return of the charges they have had to pay for having an unauthorised overdraft.

Banks have attempted to settle all the cases against them, rather than contest one before a judge; as they fear a precedent being set.

Were that to happen, all the banks would be forced to go back through their records for the past six years and repay the overdraft charges to every single customer who they have charged in that time.

In order to clear the large number of cases coming before district and county courts, mass hearings have taken place in the past few months at courts in Leeds, London, Guildford and Birmingham, with more to come in the next few weeks.

The banks have refused to say how many people have threatened to sue them, or how much they have paid out.

As I have said before, banks are in the business of making money. Even if a precedent were to be set, and every penny in overdraft charges were to be repaid, the banks would find other means of making money out of their customers (eg current account charges, lower interest rates on savings and higher rates on loans).

The dice are loaded in the banks' favour!

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Fighting Fund Set Up

Who would be a banker in today's Britain?

Gone are the days when the bank manger was a respected gentleman, in the Captain Mainwaring mould. Now the image of banks and their staff is that of a tacky used car salesman, trying to dishonestly screw the hapless customer out of every penny they own.

Another nail has been knocked into the coffin of the banks' credibility, by the launch of a £100,000 fighting fund to encourage people to launch legal challenges against what they say are illegal bank charges.

The money has been pledged by MoneySavingExpert.com and the Consumer Action Group, as well as private individuals.

The theory being that the funds will be used for claims that could set a legal precedent, in the fight against excess overdraft charges. The move comes after two county courts ruled against two customers of Lloyds TSB.

In the first, a district judge at Birmingham County Court dismissed a claim Kevin Berwick brought against Lloyds TSB on the grounds that charges were a legitimate part of the current account service and found that he had failed to lodge sufficient evidence.

The second ruling, made against a claim for £3,000 brought by Julian Rudd, came on 11 May. A judge at Lancaster County Court also found Mr Rudd, a builder, had failed to state an adequate claim.

Claims from customers have risen by 40%, according to the Financial Ombudsman. Hardly surprising, given the amount of media coverage now given to the issue of bank charges.

Which? claims that the penalty charges earn British banks £4.75BN a year.

The fund will be held in a trust by the Govan Law Centre, and will be activated when the right case presented itself.

Marc Gander, the co-founder of the Consumer Action Group, said:

"Those who do go to court usually win by default. Yet for the rare few where the bank does put up a defence, the big lesson to learn is that even where [the banks] don't show up in court, it is still worth doing proper preparation."

We shall see.

It should be remembered, as I have stated many times before, that banks are not charities. In the event that penalty charges are reduced, or capped, they will find other ways to levy charges on their customers. The most likely avenue being an end to free banking.

What will the campaigners say to that?

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RBS Invents a New Charge

Congratulations to the Royal Bank of Scotland (RBS) for being so creative when it comes to inventing new ways to make money out of their customers. Hot on the heels of the announcement by the OFT that they would be investigating unfair bank charges on overdrafts, RBS foisted a new charge on customers who don't inform it of a change of address in a timely manner.

RBS will impose a £12 penalty charge on customers who fail to notify it of a change of address, after two statements have been sent to the customer's old address.

Needless to say its customers are less than impressed. However RBS remains unrepentant.

Quote:

"It is in the interest of customers to ensure the contacts details we hold for them are correct. We give clear instruction on each monthly statement on how to contact us to update these details."

Richard Mason, head of credit cards at the price comparison analyst Moneysupermarket, said:

"I've never come across this kind of charge before. But the OFT has cut credit card lenders' profits and that has made other charges inevitable."

Michelle Slade, an analyst at the personal finance consultancy Moneyfacts, said that credit card companies were finding new ways to increase revenue.

In April seven credit card providers, including American Express, Morgan Stanley and MBNA, have raised their interest rates. Other lenders have introduced new fees payable by customers who rarely use their cards, or cut the number of days following a credit card transaction after which interest becomes payable on the spending.

There are also new classifications of what constitutes a cash withdrawal; eg spending on internet gambling accounts is now regarded as a cash withdrawal, and charged at higher rates.

As I noted yesterday, banks are not charities. Squeeze their profits in one direction, and they will find another way to make money. The customer is a cash cow, there to be milked dry.

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The End of Free Banking

The Office of Fair Trading (OFT) last week announced that it would launch a full-scale investigation into unfair bank charges on current accounts.

The OFT inquiry will be completed by Christmas, and will examine whether the "provision of so-called free banking" is explained clearly to customers. The OFT will also continue to study the fairness of unauthorised overdraft fees.

OFT chief executive, John Fingleton, said:

"This market study will enable the OFT to consider wider questions about transparency and value in the provision of personal current accounts. This will provide the necessary context for assessing the fairness of unauthorised overdraft and returned-item charges before we apply the law in this area."

Needless to say the banks have been quick to issue a counter threat, by warining that any regulatory restriction on unauthorised borrowing charges might force them to end free banking to their customers who stay in credit.

As noted many times before on this site, banks are not charities they will make money one way or another.

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NatWest Caves In

Congratulations to the unnamed businessman who took a principled stand against the excess bank charges levelled by NatWest, and succeeded in getting them to refund him £36K.

This is believed to be the largest sum ever refunded to an individual customer, since the start of the consumer revolt against excess bank and credit card charges.

NatWest caved in rather than face Justice in court, where it would have had to explain the reasons for its bank charges.

The anonymous Norfolk businessman challenged NatWest over the £26,010 worth of charges he was levied between January 2001 and February 2003. These fees were mainly for cheques and direct debits that bounced. He also claimed £10,280 interest and £400 costs.

Quote:

"The bank said it was my fault that the company grew too big too quickly - ie didn't have enough cashflow."

However, he claimed that his business had a turnover of over £1M, no mean feat, yet NatWest refused him an overdraft above £10,000.

A case management conference had been due to be held next month, in which he had planned to ask the judge to order NatWest to disclose the real cost of bouncing cheques and direct debits.

NatWest blinked first, and decided that it was less expensive to pay him rather than to rack up legal fees and publicly admit the true cost of bouncing a cheque.

However, before everyone reaches for the champagne, consider this; the banks will find other ways to make their living from their hapless customers. Should they be forced to lower their charges for bounced cheques etc, they will simply start charging for other services previously taken for granted as being free.

This is only a victory in battle, not a victory in the war against greedy banks.

The Guardian has created two proforma letters that you can use to reclaim excess bank charges, they can be accessed here Guardian Letters.

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OFT Backs Down

Proving once again that the financial regulatory bodies in Britain are "pussies", when it comes to standing up to vested interests, the Office of fair Trading (OFT) has baoked down on imposing limits on bank charges.

The OFT tried its best to save face by shrouding its decision in the thin, and flimsy, veneer of initiating an in depth review.

Stating:

"The banking industry is not straightforward and that a more detailed examination is needed".

However, the reality is that the OFT has faced sustained and intense lobbying from the banks and they have a greater sway with the OFT than the consumer.

Some banks have threatened to end free accounts, were there to be a regulatory move against excessive and unjustifiable bank charges.

Needless to say, consumer groups see the OFT decisions for what it is (a total climbdown).

Which? said:

"We agree it's crucial the OFT investigates retail bank pricing. But today's announcement still leaves people in the dark about unfair bank charges.

Before the end of the year consumers could be charged up to £3.5BN by their banks in unauthorised overdraft charges. So we are telling consumers not to be put off claiming back their charges while the OFT is looking into this - claim them back now."

In 2006 Which? calculated that bank customers pay £4.7BN each year on default charges. No wonder the banks like to make these charges.

John Fingleton, OFT chief executive, said:

"The UK retail banking market performs well in many dimensions, especially relative to international norms. However, the issue of bank current account charges is a matter of real concern to the banks' customers, and raises wider questions about competition and transparency of pricing."

However, just because the OFT are "pussies" doesn't mean that the consumer has to be one. Consumers should challenge every single unreasonable charge levelled on them by banks, as a matter of course, in many cases these challenges result in refunds being made.

If nothing else, at least it annoys the hell out of the banks and might make them think twice about "drinking the well dry" (ie overcharging consumers).

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5,000 Complaints A Day

The financial ombudsman is receiving up to 5,000 complaints a day from angry bank customers, in respect of high penalty charges.

It seems that, as the numbers of complaints are rocketing, there is something of a "customer revolt" over bank charges.

A year ago the Ombudsman received about 100 calls a day from the public over bank charges.

The FOS said the number of complaints it is receiving is unprecedented.

A spokesman said:

"It has even eclipsed mortgage endowment complaints. We usually get 200 to 250 of them a day, so it has well surpassed that."

Martin Lewis, financial pundit, said:

"The campaign to reclaim has been given huge impetus this week by the angry response of UK consumers to the enormous profits being reported day after day by Britain's banks, who are taking money unfairly from people's accounts.

This week it hit tipping point, as a whole new band of Britons grit their teeth to get their money back."

The banks are also waiting for the results of an investigation by the OFT on the issue of charges.

Earlier this week Barclays posted £7BN in profits, and analysts predict the "big five" alone will report more than £38BN in profits from last year.

Whilst the "consumer revolt" gathers momentum, those who manage to reclaim their charges should remember that banks are not charities. In the event that the banks are blocked from making money by levying charges for unauthorised overdrafts etc, the banks will find other methods of making money, such as abolishing free banking.

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Banks' Underhand Methods

Banks were accused by Which? of using underhand methods to dissuade customers from seeking refunds, after they have been charged "unfairly" for exceeding their overdrafts.

Which? said that banks have threatened to close accounts, pass details on to debt collectors and charge for statements when customers challenge their overdraft fees.

Which? claims that it has heard of charges of up to £5 per page for duplicate statements. The law permits a maximum charge of £10.

One bank tried to charge £30 an hour labour charges to send duplicates, with a total bill of £360.

Doug Taylor, the personal finance campaigner at Which?, said:

"Banks are employing increasingly underhand methods to avoid their responsibility to treat their customers fairly and refund the charges."

Angela Knight, the chief executive designate of the British Bankers' Association, said:

"Which? is clearly trying to exploit its position as a consumer body by sensationalising what could be a useful piece of research.

The banking industry handles over seven billion transactions a year and occasionally something will go wrong that's human nature.

But the way in which Which? has approached this is also personally insulting to the front-line bank staff who do an excellent job serving their customers."

As I have said before, banks are on this earth to make money they are not a charity. Try to stop them making money in one way, and they will find another way to charge you.

Customers would be well advised to help themselves lessen the banks' avenues for charging, by keeping their bank statements for at leastr 6 years.

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