Penalty Charges, CCJ advice, Formal Demand, N245 Vary in Payment
Banks
Ten banks were written to requesting information about there charges and if they would be willing to “provide us with justifications for these charges”.
Only 3 banks replied to the letter, 2 of which merely enclosed their charges and refused to comment. The one remaining bank was Abbey National. Abbey were the bank involved with the 600% settlement to Stephen Hone, yet they still justify their charges as if they had not settled to keep it out of the higher courts. But at least they had the courtesy to try!
An extract from the response is below Abbey
“Our charges cover the cost of administration in having to return items unpaid, or pay items by using Abbey funds. Therefore, the value of the transaction has no bearing on the charge amount, nor does the amount overdrawn or the time it remains overdrawn. The charging policy is also intended to encourage customers to maintain their account within their authorised limit.”
Although Abbey response clearly shows there charges are unenforceable, we would like to thank them, for a least having the decently to respond.
The response:
3 points can be drawn out of the Abbey Response and criticised
The Unfair Terms in Consumer Contracts Regulations 1999 No2083 states that a term is unfair if it “requires any consumer who fails to fulfil his obligation to pay a dis-proportionately high sum in compensation” therefore allow there argument of a control mechanism may be common sense it is unfair and therefore not binding on consumers.
* The losses which could legitimately be recovered as actual losses the bank may charge the consumer. Such things could be; administrative costs (being everything is computerised that is hardly a high figure) and interest lost by having to pay out of bank funds to cover the items. Logically, the amount of interest lost would fluctuate dependent on the value of the transaction, thus the charge should be linked to the value.
* If the banks are right and the value of the transaction should have no link to the charge cost and the period overdrawn also has no effect then why do some banks such as Woolwich charge a daily penalty for being overdrawn. Also First Directs charge for bounced cheques and direct debits etc fluctuates depending on how much the transaction was worth.
Challenge Bank Charges - says lawyer BBC Radio 4 Money Box
Ian Mullen, Chief Executive of the British Banker's Association (BBA), told the programme that banks were not charging customers more than the actual cost.
He said "The banking systems are geared to an automatic process, so when a cheque or a charge sends an account overdrawn or over an agreed limit this involves manual intervention: to extract the item from the day's work, to research the customer's recent credit profile, and then a managerial decision as to whether to return the unpaid item."
However, this process they are claiming as their actual loss seems ludicrous considering if they decide to pay the transaction and put you in your overdraft you will also be charged.
Ian Mullen also said that many of these successes were students who the banks recognised had problems: "We're dealing with students, and banks are very keen to see that students are serviced optimally. We know students today are in financial difficulty."
The response:
This is hard to comprehend as banks are profit making organisations and although they do all they can to attract students who have the possibility of earning high in the future they also want the highest profit possible. Also it should be noted that student accounts have limited or no charges so the majority of the cases can’t be students as they are not charged in the first place.
One of the listeners to the show said
" I am a computer programmer. I know what's involved and I think the charges are far in excess of what it costs the banks."
The cheque is in the post- Is it just one big profiteering scam - www.bankchargeshell
Often, people get fined by their banks because of the UK’s antiquated clearing system – you pay a cheque into your account to cover a transaction, but then still get fined because it didn’t ‘clear’ in time.
This is particularly bugbear. For the 4 working days it takes for a cheque to clear dates from the era of clerks reconciling accounts between banks manually with quill pens and paper.
In this day and age, when everything is done automatically, there is no way that 4 working days is any longer justifiable – the banks’ cartel has kept the clearing period at 4 working days to give them an excuse to earn interest on people’s money while it passes artificially slowly through the system.
Credit Cards
There are a lot more similar between companies than bank penalty charges. However, from the above it can be seen if you shop around you can get a good deal. For help with this, the following web sites provide comparison services:
http://www.fool.co.uk
http://www.moneysupermarket.co.uk
Seymore Fortscue, Chief executive of the Banking Code Standards Board said..
"If I were still a poacher I'd have a real job defending these charges. They do not appear to be related to the costs, they frequently hit those least able to pay them and they generate great resentment."
Wednesday 26th January 2006
The Guardian
Barclaycard appear to specifically target those who pay their balance on time.
BRITAIN's biggest credit card is penalising thousands of prudent customers who pay their balance in full each month. Barclaycard is cutting the period in which customers are allowed to clear their debt by up to six days. The sudden change means people can find they unexpectedly miss the payment deadline, leaving them vulnerable to a £20 penalty. Officials at Barclaycard, which has more than nine million accounts, claim the practice is standard across the industry. However, critics argue it is part of a wider pattern. Credit card company MBNA triggered an outcry last autumn after it started imposing an annual fee on some customers of up to £25. It appears the company specifically targeted those who paid their balance on time and so deprived MBNA of the opportunity to make money out of them. The public is constantly being told by the Government and others that there is a need for caution when taking on debt. However, at the same time finance companies are actively penalising those who are prudent. The Barclaycard revelations follow a recent finding from the Office of Fair Trading that credit card penalty charges are both unfair and too high.
Source , Daily Mail
8 February 2006
Banks make millions from "Unfair" credit card charges
THE big banks have been accused of using bogus accounting practices to cheat millions of credit card customers with late payment and other penalty charges. The Office of Fair Trading has written to all the main credit-card issuers asking them to explain how they calculate fees for customers who exceed their credit limit or pay late. They believe that many of the charges may be in breach of consumer contract law.
Banks are likely to have to slash the charges or face prosecution. Until now banks have stubbornly refused to reveal how much money is made on “late-payment” and “over-limit” credit card fees, despite repeated demands from consumer groups and the Commons Treasury Select Committee. However, Barclaycard, the leading credit card company, which made profits of £722 million last year, reported that 43 per cent of its operating income was generated from fees and charges.
The Times
27th October 2006
The Banks even over rule MPs. MPs tried to slam card firms over hidden charges
The Treasury select committee says card issuers are skimming money off their customers The select committee wants to make sure penalty charges accurately reflect the costs borne by the card issuer. However, firms are reluctant to hand over details of their costs.
Ian Barber of Barclaycard said:
“Nobody has responded to the Treasury select committee on default charges because it does not have the legislative power to force companies to submit commercially sensitive information of this kind.”
The Sunday Times
24th October 2006
Barber Of Barclay Card said:
“Many companies refuse point blank to lend to customers with poor credit ratings. We feel it is better to let people in this position have a credit card, albeit one with a higher rate.”
It is difficult to see how this is better for the person concerned, the only person it helps is the bank to more charges when they default on payment.
Recently whilst taking to a senior custody staff member she revealed that the people who come in often have been given credit cards and when they are charges for failing to meet responsibilities instead of it acting as a deterrent as the banks pretend they wish the charge did, instead they go and get more credit to cover it, what a brilliant control mechanism.