Thursday, 24 April 2008

Raining on the banks

It never rains but it pours; This news today that banks can b investigated for overdraft charges is yet another headache.

Banks have long run a system where even slightly steping out of line has heavy punishments for customers. This is their price for free banking. When I lived in the US, the price was heavy too and there was no free banking for current accounts either.

Many will welcome the OFT investigation and the enforced changes to bank behaviour that will result. Some things, like £30 letters etc are in need of change. However the principal of those that stay in credit benefiting most will be lost.

Free current account banking will end. High street banking in the UK is not a rip-off (samll business banking is a different matter!) and the profits are similar to other countries. Banks will move the charges elsewhere so there will be a lot of hot air but no much light generated in the next few months.

18 comments:

Simon Fawthrop said...

What pissed me off about all this was the sense of entitlement that some of the campaigners displayed. They expect free banking and to be able to go overdrawn without penalty.

As you say, they will pay either way.

CityUnslicker said...

GS - quite

Steven_L said...

with the banks short of cash and competing for deposits who will be the first to introduce annual charges and lose all their liquid customers?

Anonymous said...

Why not offer £100 free overdraft as standard, or offer people the chance to say that they want cheques to bounce if they don’t have enough money? Surely that’s not too hard/generous?

Anonymous said...

They take your money and give you an IOU in return. Then they take your money and spend it on other things. They hope that we don't all ask for our cash back at the same time or they'll be in trouble. That's why they operate cheque accounts in the first place. That's why the banking is "free".

Insist that your company pays you in cash and keep it at home, then see how long the banks would last.

Anonymous said...

The banks should be allowed to penalise those who go overdrawn, but the issue of how big a penalty is "fair" is more difficult.

Anonymous said...

Couldn't disagree more. Being charged £3o for being £1 overdrawn is indecent and only serves to snowball the poor into even worse poverty. There's nothing "free" about this kind of banking. It's nothing short of extortion.

Anonymous said...

Why not offer £100 free overdraft as standard, or offer people the chance to say that they want cheques to bounce if they don’t have enough money? Surely that’s not too hard/generous?

Jesus, I'd be happy with a £10 overdraft to avoid the headaches! Unfortunately the banks won't even allow you that if you've already been charged for going 10p into the red.

CityUnslicker said...

Ord - We all have our opinions, but generally the cases bought have been by students who never paid any debts off and the banks were just making hay and piling on the debt. people who don't get into debt don't get these charges - what is unfair about a system that rewards good behaviour.

Banks don't like really bad debt, it does not get paid off; hence the lack of banking facilities for really poor people.

However to think that regulation of overdrafts is the way out of this is wrong headed. banks will find another way to make profits out of their customers.

Simon Fawthrop said...

Ordovicius,

The first time is an expensive lesson - I got 5 days restriction or privledges as a young soldier the first and only time I went OD, which was 50p (1975 money) on the last day of the month. My sone got caned last year and also learnt a salutory lesson.

Why should those of us who go without to avoid going OD fund those who think it should be a free service? As for an unreasonable penalty, if it was it says on the tin one can hardy complain.

Anonymous said...

Why should those of us who go without to avoid going OD fund those who think it should be a free service? As for an unreasonable penalty, if it was it says on the tin one can hardy complain.

Why should somebody who goes into the red by 10p have to pay £30 because the banks won't allow them a simple £10 overdraft?

but generally the cases bought have been by students who never paid any debts off and the banks were just making hay and piling on the debt.

I thimk just about everyone here on low incomes has suffered from these charges. And I'm not talking about students who go to the trouble of going to court about it. OD charges along with charges for failed Direct Debit charges are making poor people's lives a misery. That is not an opinion, it is a fact.

Anonymous said...

The point that was made by the LAW STUDENTS was that the bank never gives anyone the opportunity to NOT go overdrawn. In other words, the bank pays out the bloody money you haven't got THEN it charges you for a service you NEVER ACTUALLY ASKED FOR. Put a duff signature on a cheque and they bounce it. Put the wrong amount on it and they charge your hundreds of pounds.

Welshcakes Limoncello said...

Came over to say congrats because you got a mention on Sky news last night for this post, c/u.

Anonymous said...

I've long favoured a tax on stupidity; the banks' charging scheme seemed a decent approximation thereto. Pity it's illegal.

Anonymous said...

Pity it's illegal.

Er, it isn't. The ruling was in favour of allowing OFT to rule on the fairness of the charges, but aknowledged that the charges were not against Common Law.

As for taxing the "stupid" (as you call those on low incomes), screwing people on low incomes does not lead to a prosperous society. But perhaps that concept goes over your head...?

CityUnslicker said...

Thansk W/C - Did not know that!

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