Banks lose overdraft charges case

I haven't paid any bank charges in 20 years, but I think I soon will thanks to these complaining overpending tossers.

Not just yet. As the article you referred to says, all that has happened is that the OFT have won the right to rule on bank charges.

Regards,

I take it that you`re as gutted as me then! I was quite enjoying free banking, but that`ll soon vanish now the people who can`t manage their money won`t be subsidising those of us intelligent enough to handle our money properly. :-(

If you've got enough money, you'll still get free banking. I would expect most banks to follow the path that my bank (First Direct) have already taken, and charge a fee unless you meet certain criteria related to minimum deposit or savings. The people who will end up paying are, by and large, the ones who pay now - they'll just pay differently.

The only real losers will be those who have no savings and little income but manage to avoid going into the red - they will have to pay charges, and won't find it so easy to avoid them. I think it is unfair on such people, yes, but they are in a distinct minority and I'm not sure that the banks necessarily owe them a favour.

Mark

FD already had that before all this blew up.

Or the same. FD have changed their T&C's to define going overdrawn without an arrangement as an "informal request" for an overdraft, rather than a breach of the T&C's, and there is a charge if you make something like more than 1 of these "informal requests" every 6 months!

So it's not a breach of their T&C's, for which an excessive penalty would be dubious, it's a charge for a service!

They're simple to avoid, you just need to open a savings account (which you can deposit 1 in then withdraw). Having the saving account exempts you from the monthly charge on your current account!

Not just first direct. AIUI the court has ruled that overdraft charges are NOT penalties and therefore do not come under the common? law that they should be a reasonable estimate of the costs.

But the court has also ruled that they do come under the OFT unfair contract terms regulations (although no rulings yet as to whether they actually are unfair)

Presumably the unfairness will arise if it is shown that (at least for some people) an overdraft is a necessary part of life and there is no effective competition with regard to the costs of overdraft.

I was under the impression that most banks charged much lower rates for authorized overdrafts - I'm pretty sure one account I've got that has an overdraft facility would only charge interest and not fees so, in my (probably naive) opinion, the banks have a good chance of winning this last bit.

Assuming my interpretation is correct and the "Banks lose overdraft charges case" headline on the BBC yesterday turns out wrong then I think some people are going to spend their "refund" and then discover they're even more overdrawn when the banks don't have to pay anything. (Of course, one would assume that the BBC has had experts look at the court rulings and my interpretation is the incorrect one)

Tim.

There are many who don't manage their money properly, but the charges are still massively excessive. I've had a current account for 40+ years with TSB (now LloydsTSB) and it has always been in credit. It's the linked account to several internet accounts, so if I just happen to make a mistake online, or don't co-ordinate credits and debits correctly, I could accidently go into unauthorised overdraft. That would be automatic without regard to my credit record with them.

The charges are spectacular and as an example of unfair balance of terms, consider:- LloydsTSB deducted £240 from my account without notifying me. They claimed I'd failed to put a cheque in a deposit envelope when they had in fact processed and cleared the same cheque and got the money. When I happened to notice, they put the money back and added a few pence for three weeks lost interest at 4% AER. Now if I 'd made a mistake and borrowed £240 from them, it would be an unathorised overdraft. They'd want £240 repaid plus interest at about 19% AER and the overdraft charges for these particular three weeks (spanning two separate monthly charging periods) would be £270.

Bear in mind that the threat to introduce monthly charges for banking is not to cover them for lost actual costs, but to replace the large contribution such charges make to their massive profits.

penalty

charges

Interesting - missed that bit - so basically the change in wording in FD T&C's weren't necessary...

But remember these are *unauthorised* overdrafts, I don't think anyone could argue unauthorised overdrafts are *necessary*. After all the banks could simply bounce payments, which the courts and OFT don't have an issue with. Arguing that unauthorised o/d's are necessary is like arguing that banks have no right to refuse lending.

If they charge just interest, then yes, but I think this is unusual. It's really the fees that are the big money earners for the banks. The fees really can be ridiculous, a few years ago my wife went about 11 overdrawn and they tried to charge her 5 *per day*, and she only found out after 8 days. She got most of the money back, as it was a "first offence".

Interest only would be fair, even if the unauthorised o/d interest rate was very high. Even if the rate was 50%, it would cost less than

In message , Andy Pandy writes

The real money spinner is when they bounce the payment for insufficient funds but charge some 38-39 GBP for doing so then write to advise that they have charged this sum and charge a further 30 GBP for the letter.

So one bounced cheque and the payment isn't made but the account holder incurs some 68 or 69 GBP charge putting them into an unauthorised overdraft situation which of course incurs special (penal) rates of interest. Now that is daylight robbery.

And what they don't make clear in their T&C is that they will treat every payment made whilst you're overdrawn as a separate 'informal request'! (As a concession, they will only charge you for one request per day). My wife has just run up a bill of £150 for being slightly over her limit for 6 days. I'm currently referring this deliberate omission from their T&Cs to the Financial Ombudsman.

Absolutely. IIRC some banks are still making massive profits, despite the Banking "crisis".

request

So no change then in practice by the sounds of it. Though have you discussed it with them - I've usually found FD quite reasonable - once I wrote a cheque which I was expecting to covered by a credit I was expecting, but the credit hadn't cleared, and they phoned me to tell me and said they'd send the cheque around the clearing loop again so delaying payment a couple of days. No charge.

I think the moral is to always have an overdraft much bigger than you think you'll ever need. I've got 1000 o/d but rarely use more than

charges

It would, but it's highly likely they'd refund you if you complained, and it was a "first offence".

Quite.

banking

And perhaps the point to bear in mind here is that the careless/useless with money types were/are actually subsidising free banking for the rest of us.

Most banks give you an overdraft facility without even asking for it. People are obviously going beyond that limit.

No different to driving with the fuel tank on empty. Sooner or later you will run out and then you pay the consequences.

Probably why many of us are so resistant to using those deposit machines...

I guess if 'cross subsidy' was the real issue the banks would have to reduce whatever fees they make from commercial operations and charge average consumers monthly fees for the services most of us currently get for free.

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Then you have not been listening. The OFT have an issue with charges for things which are not 'services'. They don't regard (and the court agreed with them) bouncing a cheque as a 'service', in the same way as they don't think granting a temporary overdraft so that the cheque can be paid, is a service.

tim

I always wonder about these bank charges for writing letters. If the bank makes a mistake and we write a letter to them about it, can we charge them GBP 30 for doing so?

Chris

I'm not sure you can (I could very well be wrong though !)

AIUI this result just means that OFT can ask a court to determine if the contract between the customer and the bank is unfair. Even if a court does decide that in future(and that's not certain), I'm not sure that means customers can reclaim charges they have already paid.

I've a feeling the legal position is : "If you(the customer) thought the contract was unfair you should not have paid up but challenged the bank at the time, you didn't, so tough"

A possible analogy is :

You approach a solicitor to handle your house sale. They tell you it will likely cost you circa £10,000 for all the searches etc. You agree, he/she does the work, sends you the bill and you pay up.

Two years later you decide you were "ripped off", not because the solicitor didn't do would they said they'd do or did it badly but just because their fee was "too high". You'll have a hard time convincing a court that the £10,000 should be refunded,

Cheers,

John

You are.

If the decision is that the clause are unfair, then they are retrospectively void.

Should the OFT not decide to force the change retrospectively there is nothing to stop individual customers doing so on their own. The Banks will have no defence to the retrospectivity of such a claim (though they can defend the case on the basis that the OFT's view that the claues are unfair, is wrong)

There is no such time limit on the consumer. He can take whatever action he likes within the statutory 6 year limit for debt enforcement.

tim

Do you have a cite for that ? I know unfair contract terms are unenforcable but this is not about enforcing a current contract if the customer has paid the charges.

There is no debt, so how can that be relevant ?

Cheers,

John