/ Money

Is it fair to allow banks to cash in on vulnerable customers?

Overdrawn

Last summer, Which? research showed the high cost of unarranged overdrafts and how these charges can hit banks’ vulnerable customers the hardest. Rachel Reeves MP joins us to explain why action on these charges is long overdue…

The latest Which? research published today has again highlighted how banks are still cashing in on customers who rely on unarranged overdrafts.

Charges from big high street banks could cost up to 180% of the amount borrowed, showing the shocking extent to which customers are being pushed further into a spiral of debt by their own banks.

At present, the major banks make more than £1bn per year through the charges they levy on unarranged overdrafts. Most of the money comes from financially vulnerable customers.

These are people who are already in difficulty, trying to manage debt day-to-day, and for whom the banks should have a responsibility to help manage their finances.

Review of charges

Huge progress was made on the charges faced by those accessing finance through payday lenders with the introduction of a cap, so why are the banks being allowed to charge such exorbitant amounts?

The Competitions and Markets Authority (CMA) recognised the issue when it conducted its review into the Retail Banking Market – but it failed to deliver any real solution in its report published last summer.

It fell short of proposing an independently set maximum cap on charges – instead allowing banks to set a cap themselves, at a level of their choosing.

This cap as proposed by the CMA looks like it will be ‘business as usual’ for the banks, and will likely do nothing to stop the deepening of a person’s debt crisis with punitive and disproportionate charges.

We need a proper effective cap, set by and enforced by the Financial Conduct Authority (FCA), for it to have any impact on helping — rather than worsening — the situation for those people most in need.

The CMA passed the buck firmly to the FCA which has, thankfully, agreed to recognise the issue as part of its review into High-Cost Short-Term Credit.

However, in the meantime, financially vulnerable customers are being pushed further into debt by these high unarranged overdraft charges.

Action on charges

That’s why, in a debate in Parliament today, I’m calling on the Government to take action now.

I want the Government to set a maximum cap on overdraft charges to stop banks being able to impose charges that can be as much as 7.5 times higher than the maximum charge on a payday loan.

Today’s research is invaluable in highlighting the true nature of these charges, I’m extremely grateful to Which? for all the hard work and campaigning they are doing on this issue. I’ll continue to work closely with Which?, and do what I can in Parliament to put an end to these exorbitant charges.

This is a guest contribution by Rachel Reeves MP. All views expressed here are Rachel’s own, and not necessarily those shared by Which?.

Have you been hit by an unarranged overdraft charge? Do you think enough is being done to crackdown on these charges?

Comments

In a Bank no two accounts are the same . . . . the Bank has Good Customers and unfortunately Bad customers. Clearly, in the case of the former the Bank doesn’t want to lose that customer But as regards the second one these are the one’s who cause the Bank a lot of trouble and their accounts need firm control. There is Staff time; Out of Order Accounts production with computer time and then the Investigation Time as to whether to Pay the item(s) or to Return them Unpaid. Customers are not given Accounts to abuse them . . . . if no action is taken the Bank is left with a Debt which the bad customer cannot clear. It is only Right that they should be penalised with a Charge. It is normal for the Bank to warn the customer the first time and then raise charges at the next default. If the customer opersists the customer will be asked to make alternative Banking facilities.
As far as I know the Co-operative Bank are one of the fairest banks in this area.

Gerard White says:
11 February 2017

Do you mean the same banks who destroyed the economy, created unsustainable huge debts which were absorbed by countries as sovereign debts and caused the austerity measures which affected those most vulnerable customers the most?
Or do you mean Co-op bank chairman Paul Flowers cocaine, crystal meth, ketamine and prostitutes?

Richard Perkins says:
9 February 2017

If one needs an overdraft it should be possible to pre-warn the bank and agree the amount. It is possible that some customers do not know how much they have in the bank because they do not keep records. Perhaps the bank should use the unauthorised OD charge as prompt to remind customers to keep records and pre-arrange the OD. Presumably this will reduce the level of charges.

You ask your bank directly or online if you want to arrange an overdraft. Banks will enroll you in their text service to your mobile to warn you of an impending excess overdraft. They have grace periods. This gives you the opportunity to put funds in your account and avoid unnecessary charges.

What happens if they can’t afford mobile? Or have no reception?

It is still helpful for those who do.

That’s true, but I suspect many of the truly poorly paid will be living in areas of poor reception or simply not be able to afford mobile ‘phones. This is the issue: there are no simple answers, much as some might believe there are, and the only thing about which we can be certain is that banks must be stopped from exploiting the poorest.

What we can do to help the poorly paid, the vulnerable and everyone else who has an overdraft is to put an end to unjustifiably high interest charges.

Agreed.

My daughter bought her youngest son a Nokia mobile for £15 on PAYG. So I’d suggest anyone can afford a mobile. Useful for other things too.

It is, in my experience, not interest charges, it is penalty charges or fixed daily rates that push up the cost. What we could do to help them is to arrange an overdraft facility if they could use one, or to opt-out of any unarranged overdraft provision if they are unsuitable, If they are “poorly paid” then it is not the banks’ job to supplement their income; that is the role of the state. So the other help we could give them is ensure they are receiving the benefits they are entitled to.

Who is suggesting that the banks supplement anyone’s income? What is wrong with banning punitive interest charges?

It might be worth looking at the comments of those who do have experience of interest charges.

My bank charges the same interest rate on both arranged and unarranged overdrafts.

The primary way to avoid the fees associated with unarranged overdrafts is to arrange a facility with your bank. Then track your finances to know where you stand. We should be looking at positive ways to help people, not condoning unarranged overdrafts. It seems a simple and straightforward approach to me.

And who’s condoning unarranged overdrafts? The thrust of this topic is the obscene interest rates.

If these articles began with urging people to arrange an overdraft facility with their bank, and if used it would attract fair charges, then I might agree. But when such advice is omitted, and the thrust of the article is to launch into an attack because those who don’t bother are penalised, I’d suggest using “condone” is fairly appropriate. The cart is being put before the horse. There is an easy way to avoid these fees; use it.

No, there isn’t an easy way to avoid these charges. These charges – simply put – are profiteering on the backs of those least able to avoid it. You might think the answer is easy – simply arrange an overdraft – but it’s far from easy, as many can testify.

According to OFT 65% had an arranged overdraft facility and, if they stay within their limit, avoid these fees. If you qualify, it should be arranged. If you don’t qualify there is likely to be a good reason. The way to avoid fees then is to avoid going overdrawn, or limit the cost, by managing your finances.

I do not “condone” excessive fees but I see the reasoning behind people paying higher fees when they do not have their bank’s agreement to borrow money. The CMA/FCA have looked at this seemingly with representatives from all interested groups, including consumers, and the report lists a lot of improvements. The problem, and the primary solution, starts with the customer. So why not concentrate attention on dealing with the cause, at least as much as the effect?

What is your justification for charging anyone high rates of interest, Malcolm? I don’t disagree that people should manage their money but surely the first priority is to put an end to all forms of excessive charges. You may be happy with a credit card interest rate of 18.9% but I am not, unless this can be justified.

The banks are making large profits from overdraft charges while you and I enjoy a wide range of banking services free of charge. Would it be fairer to charge us and stop exploiting the poorer members of the community?

Here is a link to overdraft terms. http://www.which.co.uk/money/banking/bank-accounts/guides/best-bank-accounts/best-bank-accounts-for-authorised-overdrafts
According to the FCA, most overdrafts are short term, so charges are low. HSBC gives, from memory, a charge of £1.40 -ish for borrowing £100 for 28 days.

If you want longer term lending then a personal loan is a best bet – my banks charges 4.5% or less depending upon the amount and the term.

I, like many, pay my credit card off each month so don’t get involved in paying interest.

All these involve people choosing to borrow money – either because they do not have it to dip into. Or because they would rather pay their credit card provider interest than raid their savings; personally, not a sensible move in my view. All these institutions – well, the ones I deal with – clearly publish their charges, so we should know the consequences if we bother to read them.

There needs to be some balance in these discussions that does not continually try to take away an individual’s personal responsibility.

I have made clear my views on the “vulnerable” and how we should be concentrating on helping them.

“If these articles began with urging people to arrange an overdraft facility with their bank, and if used it would attract fair charges, then I might agree. ”

That’s a good point, but, for many, I think one of the root causes is that they are unable to limit their expenditure so that it does not exceed their income. Overdrafts and other loans provide short term fixes but then interest charges kick in and make matters worse overall.

Malcolm – I have been reading the Conversation about high charges for parking offences and see that you and many others are opposed to excessive charges. I agree. Why do you think is it OK for banks to be allowed to make punitive charges for overdraft services but parking companies should be stopped? Does anyone else see a distinction?

The tendency to overdraw beyond the authorised limit can be dealt with through the service charge [which should be reasonable and justifiable]. Because of current low bank rates, banks are not losing significant amounts of interest themselves through unarranged overdrafts depleting their funds [!], so how do they justify such high rates of interest? The same applies to credit card interest rates but they cover the whole operating costs: still too high though.

The key then is to limit their expenditure to not exceed their income – even without charges that is a recipe for increasing debt, surely? Education in dealing with finances should be provided – by banks among others – to help people deal with such problems.

If you do read my comments you will see that I have not generally discussed the level of charges, but suggested that while we focus on those we are avoiding the root cause of the problem and its solution. That is, getting people to understand and control their finances and, where they then see there may be an occasional drift into a negative balance, ask their bank to arrange an overdraft facility so it will be dealt with at reasonable cost. The details are not given here by Which? but if you look at their advice elsewhere you will see you can have an overdraft of £500 for 2 weeks each month for an annual cost of between £17 and £40. That seems very reasonable to me.

I have supported a penalty parking charge, not abolishing it. Nor do I support making the charge just the same as the parking charge that was not paid – just as I do not agree, as some do, with making unarranged overdraft charges the same as arranged ones. There should be a deterrent effect otherwise you will perpetuate serial offenders to the detriment of others.

We should agree to differ. I want to see an end to all punitive charges.

The real issues are threefold: by allowing people to draw down money from what is ironically called an “unarranged” overdraft the Banks are guilty of deceit. How can it be “unarranged” if the bank has a policy which permits people to exceed agreed limits? Malcolm says that penalty charges will deter, yet he also states that he believes almost half of bank users don’t bother arranging overdrafts. These iniquitous charges are not new: they’ve been around for about 8 years, so if the logic of using ‘penalty charges’ were even remotely true, surely the masses would have been stampeding towards banks to arrange overdrafts? That they haven’t is ample evidence that these charges don’t work. So why are they maintained? The answer is obvious: they’re money cows for the bank.

The second issue is that the mantra (repeated more than 25 times in this and other topics on the same issue) of just going to the bank and arranging an overdraft simply doesn’t work for many. Banks will impose very low overdraft limits when they see customers are holding two or three jobs, each with irregular hours and differing payment dates. In other words, they target those least able to cope – not through idleness, but through circumstance.

The final issue is one of supreme irony: that it actually makes more sense for someone to become completely unemployed and remain that way, rather than try to struggle with holding two of three jobs in order to make ends meet. In a very real way these penalty charges by the banks are encouraging the very behaviour some might not wish to see.

I attempt to put views that I believe add balance, to help the discussion. I dislike this being characterised as “mantra”.

Apart from the “vulnerable”, whom I have said need our special attention, others are responsible for running their own lives and to understand and deal with their finances responsibly. The example of 3 jobs and the alternative of going unemployed is something the state needs to deal with, not the banks.

“Unarranged” means what it says – the customers has not asked their bank. It does not mean the bank will not “allow”. Customers can opt out of going overdrawn by telling their bank. The CMA/FCA are addressing ways of dealing with the consequences. However, if someone is eligible for an overdraft then the responsible, and financially sensible, action is for them to arrange it. That is the starting point to avoid excessive fees. How many customers would be refused by the banks and for what reasons? – is there data?

We should be helping people to organise their financial affairs properly.

A mantra is defined as a repeated belief or saying, and the same points are being repeated. For instance, when you say “if someone is eligible for an overdraft then the responsible, and financially sensible, action is for them to arrange it.” that makes 26 times you’ve said exactly the same thing. Saying something repeatedly does not make it right or, more importantly , relevant.

On the second point, “the example of 3 jobs and the alternative of going unemployed is something the state needs to deal with, not the banks. ” I do wonder what your answer to that situation is.

It’s more amusing when I read this: ““Unarranged” means what it says – the customers has not asked their bank. It does not mean the bank will not “allow””. I’m having a little trouble relating this to the real world.

When I go into a shop in order to purchase an item I complete a contract with the owner by paying money in exchange for goods or services. If I want to borrow money I complete a form which forms the basis of a contract between me and the lender. As far as I can see there is no contractual basis for a bank to give out money for which permission has not been previously sought nor for which a contract has not been made. So here’s the question: why do they do it? Could it possibly be to rake in more funds for those least able to afford them?

I’ve replied elsewhere.

A CAP ON WHAT? WHY NOT A PERCENTAGE OF THE ACTUAL AMOUNT? THUS, AN OVERSIGHT FOR AN O’DRAFT OF PENNIES FOR A DAY OR TWO IN A STATEMENT CAN BE EQUITABLY BALANCED AGAINST ANOTHER OF HUNDREDS OR THOUSANDS FOR MORE EXTENDED PERIODS.

Paula Varley says:
9 February 2017

There has to be a way of keeping track of spending and having an authorised OD limit, where maybe automatic alarms could be sent by text to the user. No matter how poor and vulnerable the customer, they will almost certainly have a mobile phone. If they choose to ignore the warnings that they are close to their limit, then their account could be frozen when they reach it. No overdraft no charge. Some banks (like Barclays) already do something like this. The era of the “bounced cheque” is still around.

Rafique Fatah says:
9 February 2017

Fees should reflect their cost and not include a profit element. If banks are in reality calculating their fees to inculde everything they can think of, such as all and any indirect costs, then, yes, government should step in and have the FSA check the banks calculations for the fees they charge and have them approved by the FSA before they are allowed to pass them on to customers. It is fair that banks be allowed to recover costs but if they cannot be trusted to keep these to only their direct costs we need the law to be clear that only direct costs they incur can be recovered and there needs to be a mechanism to ensure banks stay honest and heavy fines imposed if they are found to be dishonest. Perhaps fines based upon three times the FSA’s opinion of how much they have benefitted from dishonest calculations would be a deterrent as to date banks have laughed at the fines imposed upon them.

Ian Scowen says:
9 February 2017

When ever Banks and others are left to decide there own rules they seldom seem to settle on an equitable or fair policy and usually settle to charge the maximum they feel they can get away with.
Time and time again we see that there it is left to the regulatory authority to police these issues they will only step in when the public get incenced with the greed of these organisations.
In the past 40 years I have seen that most organisations show a total disregard for fairness and loyalty they show their customers and this is blatantly obvious when reviewing interest rates where the better rates are given to encourage you to join and within 12 months they resume to totally insignificant values.
It should also be remembered that many of the Banking elite are paid astronomical bonuses which is paid for by the extortionate charges and the termination of the jobs at the front end.
We are constantly being told this is what the customer wants. NOT TRUE this is what senior management want to drive down their costs to inflate their Bonuses.
The public need to wake up and chase the parliamentary representatives to take action on this and many other failures that have become common in the last 40 years.

Dennis Sharp says:
9 February 2017

I feel that not only are banks taking advantage of the financially vulnerable, by hitting them with excessive overdraft fees, but they and credit card companies are also benefiting from massive interest charges, which seem to go unabated where credit cards are concerned. Where are the FCA on this one?

Thanks for your comment, Dennis. We’ve made this the featured comment on our homepage

@ldeitz, I’ve been out in the miserable weather so perhaps feel the same………..But may I ask why you do not also question why people who can, do not avoid such fees by arranging an overdraft facility? And what evidence supports “unabated” credit card fees? Mine has been at 18.9% for years and as I pay my card off monthly I avoid it.

I would not like to have to criticise Which? for adopting an unbalanced stance, but it rather looks to be the case. 🙂

I wonder… Perhaps most of those incurring these extortionate charges do have arranged overdrafts. Just not large enough, so they’re pushed into the red by circumstances beyond their control. That happens.

I bet a lot of the people who are unable to change electricity tariffs are also unable to arrange large enough overdrafts and/or to balance their income and expenditure.

As far as I can determine, out of 68M personal accounts, 24M have no overdraft facility. It would be useful to know how many without such a facility go into an unarranged overdraft.

It does seem that the majority of people really don’t take much notice of overdraft charges that are published by their bank, nor do they select a bank on the basis of overdraft charges even though they will use an arranged facility. Perhaps we need much clearer notification in simple terms. The FCA could produce a model document for banks to provide. We also need to be better educated in the use of bank accounts; maybe for many this is like not switching energy providers – lack of effort, or lack of interest.

Whilst I do think it is incumbent upon capable people to deal responsibly with their finances – it is their livelihood they are looking after – we should encourage better education and provide tools to help them. The CMA report does list positive proposals in this respect.

However, we must find ways also of helping those who genuinely cannot deal with their finances properly themselves. Proposals here would be constructive.

But sometimes conditions prevail that prevent even the most cautious from staying in credit all the time. This has nothing to do with those ‘unable’ to do it; it’s to do with those placed in that situation by a combination of factors beyond their control.

This is about understanding your finances, so if something untoward happens and you realise you’ll need temporary help you can discuss it with your bank or arrange an overdraft online – if you are a suitable candidate. If you are not (cannot manage to repay) then you’ll need to make alternative arrangements. It is not your bank’s job to supplement your income unless they can recover the money.

“Beyond their control”. It is the customer who spends the money that takes their account into the negative in the first place, or does not track their spending well enough to see when they might exceed their balance or agreed overdraft. We should start with the cause and address that. The only person who generally has control of their spending is the individual.

Perhaps to a limited extent that’s true. But in an age where letting companies, insurers, utility companies and others all either insist on DDs being set up or offer incentives to do so, through lower payments, and when the individual concerned has three jobs, all paying at different times with variable hours the individual can fall foul of the DD system. That is certainly beyond their control.

If the bank is prepared to extend funds, despite no prior arrangement having been reached, then I believe the responsibility for so doing lies squarely with the bank and therefore the interest they charge should be tightly controlled.

It is the fact that banks do not put a stop on available funds, but continue to advance them that makes them the chief miscreants, and it’s also why those who keep on about ‘stealing’ are so utterly wide of the mark. .

“If you are not (cannot manage to repay) then you’ll need to make alternative arrangements. ”

“We’re Bonnie and Clyde and we rob banks!”

Going without – or tuning to crime – might both be available alternatives.

The direct debits I set up had withdrawal dates of my choice. it is still an individual’s responsibility, when taking on a financial commitment, to ensure they have the means to meet it. It is not in the bank’s power to second guess the income of individuals, but you can sit down with the bank and discuss your finances. if income exceeds expenditure you should be OK. The starting point to cover direct debits that might not coincide with your income is to arrange an overdraft. The cost of this for a few days is likely to be quite low – certainly when compared to taking money you have not agreed with your bank. Why not promote this sensible course of action?

If your bank does allow unarranged overdrafts (and it seems Barclays, for one, do not) you can opt out and avoid borrowing money and paying charges. However this may result in unpaid direct debits, for example, being returned and charges being incurred. All the more reason to control your finances. The remedy starts with the account holder.

Can’t you see that the banks are guilty of perpetrating fraud? By allowing people to draw down money from what is ironically called an “unarranged” overdraft the Banks are guilty of deceit. How can it be “unarranged” if the bank has a policy which permits people to exceed agreed limits?

The cost of the bank advancing you money without you asking for it (that’s actually what they do, BTW) is extremely high and not the usual overdraft rates. Barclays’ system is not quite as benevolent as you might imagine, either: they have something called an ’emergency borrowing buffer’. That’s a massive £15, so that would certainly help you out. For a mere £96 per year (subject to fluctuation – up, perhaps) you can avoid the unpaid bill charge…

It seems to me that your main issue is with Which? and what you perceive as its failure to run a comprehensive money management and education course. But can you not see that that’s a totally different issue? This is all about extortion, sharp practice and abuse. of those less able to cope. Which? is doing what its remit dictates: protecting the consumer and looking after the consumers’ interests. And long may it so continue.

Why, once again, attack the messenger?This is a discussion about a topic with different views, not about one or another imposing a decision.

If I have an “issue with Which?” it is in presenting an unbalanced story. I have not supported excessive fees, but that is starting at the wrong end of the problem. The main problem in my view is to look at why people get into debt in the first place. that is what generates need for credit, whether on cards, loans or overdrafts.

If people deliberately and knowingly run their finances that require debt support then they should know the consequences – essentially a cost. Minimising that cost is done by selecting the correct loan product – such as an arranged overdraft facility.

If they get into debt unknowingly then the help they need is to deal more effectively with their finances. This is an individual’s responsibility and they can only benefit from doing so. Blindly spending more than you earn, if that is the case, cannot go on for long without serious consequences. It is here that I have repeatedly suggested help, tools and other information is given to learn how to better handle their money. I believe the banks could be more involved – although many already give this apparently. Simply burying your head in the sand, ignoring financial reality, and then having to face the consequences is not a good ploy.

Which? could produce a booklet and maybe an app on financial products, budgeting, dealing with income and expenditure in the same way it does for smart phones for example. and use the same tv route to get the message over. Which? has a social responsibility that includes education. I support that and help fund it.

Why not support positive efforts to help people? This is not an “either”/ “or” problem. Dealing with charges and helping avoid them are both needed. In my personal opinion, of course.

No one is attacking the messenger, but rather attempting to correct what appears to be an absurdly simplistic and I would suggest uninformed view. I appreciate this is not an ‘either / or’ issue, but that’s what appears to be coming across. There seems to be no comprehension whatsoever that there could be any reason on this planet why someone might enter the disingenuously titled ‘unarranged’ overdraft through circumstances beyond their control.

And when the solution to getting into such issues, patronisingly described as “blindly spending more than you earn” is even barely conceded, then the advice is to get help to “deal more effectively with their finances”. There is no comprehension evident that the scenario I’ve repeatedly described even exists, and even if it did it would obviously be only a case of “burying your head in the sand, ignoring financial reality, and then having to face the consequences”.

I agree that helping people to cope is important, and all the banks claim to do just that. Funny, that; because it doesn’t seem to stop them refusing adequate overdrafts or removing so much in penalty charges that the situation simply becomes far worse.

It’s also fairly easy to see why people incur debt: rent, insurance, utilities, food versus erratic hours, different payment dates and seasonal changes. It doesn’t need booklets or articles by Which? to ‘educate’ people about this. It needs the playing field to be levelled, so the banks are brought into line in exactly the same way the loan sharks have been.

It’s also the odd assumption that everyone who incurs debt is either a profligate spendthrift or utterly clueless that I find offensive. Many of the debt issues are aggravated by the banks’ penalty charges. Hopefully, the end will shortly be in sight for these and – if there’s any justice whatsoever – those so abused by the banks will be recompensed.

I see no point Ian in responding to this kind of reply. A Convo is about an interchange of views, information and facts which others can consider. I have not used words such as “absurd”, “uninformed”, “no comprehension” to describe others’ comments, nor would I.

Hello, just a gentle reminder that while it’s fine to disagree can you all please ensure that the discussion avoids becoming unfriendly.

@malcolm-r, to answer your question we have been pressing for those who do think their financial situation will cause them to slip into an uarranged overdraft to speak to their bank to arrange such a facility. We’ve published reviews of both arranged and unarranged overdrafts so that people can asses these facilities themselves. The Competition and Markets Authority’s two year inquiry into the banking sector found that over half of overdraft users had used an unarranged overdraft at some point.

The problem that we found is that charges for unarranged overdrafts are pretty exorbitant and we think that there shouldn’t be a difference between the unarranged overdraft fee and the arranged overdraft fee. And so our call for the Financial Conduct Authority, who are conducting a review at the moment into high cost of short term credit (https://www.theguardian.com/business/2016/nov/03/fca-banks-credit-overdraft-fees), should be looking at this because we don’t think it’s right that such exorbitant fees should be charged.

Credit card fees is not something we’re currently looking at, we have campaigned for many years on surcharges, but not on credit card interest charges.

@ldeitz, I have said earlier that these Convos are usually introduced without the suggestion that people attempt to arrange overdrafts, and find ways of getting their financial affairs under control. The emphasis has been on attacking the banks, whereas we should also be attempting to deal with the root cause – we should avoid debt where possible and have help to deal with it if we get into difficulties. This is where I would like Which? to adopt a more balanced approach.

Nowhere have I condoned excessive charges but neither do I agree that those who remove money without an arrangement should pay no more than those who have arranged an overdraft facility. There is then no incentive to deal with your financial affairs responsibly.

Without wishing to pontificate (but I will) one of the objects of the charity to promote, for the benefit of the public, impartial and scientific analysis of and research into the standards of goods and services available to the public as consumers. “Impartial” to me means looking at the issue dispassionately in the round, and the other objective of “advance the education of the public” seems relevant.

I am sorry if you see views that disagree with Which?, or question Which?’s stance, as unwelcome, but I see as a Convo depending upon contrasting views for it to develop.

What I would ask is exactly where the Convo will lead. Which? has already had opportunities to make their views known, and their proposed remedies, to the CMA, along with other consumer groups and the rest of the interested parties. Is there still scope to influence the FCA.

There are a couple of simple steps the Government could take to stop Banks from ripping off nearly all customers.

First, Overdrafts – Cap maximum Overdraft APR interest rates at the same level as that imposed on all other lenders.

Second Credit Cards- a) Cap the maximum APR interest rate on Credit Cards to a reasonable multiple of bank rate.
b) Increase the current derisory minimum percentage of Credit Card outstanding balances that must be repaid each month.
The current Credit Card system results in perpetual indebtedness and is the single largest income stream from customers.

You may well wonder about the relationship between Government and Banks, that has resulted in their failure to implement such clearly beneficial and easily accomplished legislation long ago.

Smike

Jackie Staniforth says:
9 February 2017

I had a minor bank account to cover a house I rented out. By mistake, over the Christmas period some years ago, I overdrew by just under £20 (I had over £3000 in my savings account). I was not informed until my printed bank statement arrived several days late, although I used online banking. In the end I was charged over £70 for what was, with the holiday period, 3 working days overdrawn. Nothing I could do would change the bank’s mind so I immediately changed bank and took my savings with me. But it’s horrendous to charge £70 for what actually cost them nothing, since it was all computer no people. The rent from the house plus my state pensions are my total income.

Shirley Clancy says:
9 February 2017

Thank you Which for getting involved and helping in the fight for fairer banking; all banks are so rich and yet do not play fair with their customers’ needs – too many charges for too little good customer service;

Wilma R says:
9 February 2017

I’m very savvy when it comes down to banking and budgeting so I can see it from both sides of the coin, there will be occasions where exceptional circumstances kick in, such as heavy months of unforeseen expenditure. So if there was a realalistic capped rate people would be able to budget better. There are a lot of irresponsible people that live hand to mouth with no provisions to save for a rainy day, and also people that can barely exist on the meagre wages due to wage freezes. Rates have to be proportionate to inflation and the current economic status quo, but bank customers need to do their bit as well.

Annie Goodwin says:
9 February 2017

I don’t think banks should allow anybody to go over their prearranged overdraft amount. because of the problems in them doing so and people complaining about the high cost of unarranged overdraft fees, people like me who take great care to keep within my arranged overdraft amount have seen fees for these increase dramatically. I used to pay a percentage on arranged overdraft now there’s a flat rate for any overdraft between £1-£1,000 pounds. I live on a very small fixed income so occasionally rely on a modest overdraft to tide me over any emergencies. However, the fixed rate and the fact that it takes me a while to get back in balance again can cost me about £21 per month while I am doing so which is a small fortune on my budget.

It has been long time known fact that banks are crooks . They no longer care for customers as proved by bankers crisis . Who profited ? Bankers . and general public are still suffering from fall out . Do the politicians care . NOT a bit

D Griffiths says:
9 February 2017

People need to take responsibility for their own lives and not blame someone else if they mess up. Banks are an important part of our lives so continually giving them a kicking every time is the wrong approach. I do object to flat minimum charges where a small infraction results in a disproportionate penalty. Charging an enhanced interest rate over the agreed overdraft rate is fair in my opinion provided it is not extortionate.

There has to be a balance between egregious profiteering by banks and irresponsible over-drawing by customers. We are, after all, talking about UNARRANGED overdrafts here.

Banks need to make sure their processes don’t create bogus overdrafts. My bank always applies debits before credits, so it’s possible to go overdrawn on one line and back into credit on the next. One might think that wouldn’t result in a charge, but it did when it happened to me (some time ago now). I was met with the excuse that although both debit and credit arrived the same day, credits weren’t posted until the next.

Duncan Wilcock says:
9 February 2017

Because its the people with not much money that it effects most 😡

GrahamBrealey says:
9 February 2017

I am not sure, I think there should be a pro rata stepping arrangement based both on time and value of overdraught.
I am almost certain if a constraint is put on this element of the Banks business then as has happened in the past it will be loaded somewhere else like for instance on a mortgage or personal loan or whatever. The banks are too large and command too much influence there is simply not enough competition similar to the Energy providers they are all monopolies of some form and legislation only squeezes the current problem and forces it somewhere else in the chain. There is only one cake and how it is cut is beyond us meremortals to change

Christopher Carroll says:
9 February 2017

Banks are on a WIN WIN deal…they charge enormous fees when we default…loans are set at high % payback..credit cards…interest is extortionate to say the least….BUT WAIT , WHOSE MONEY ARE THEY LENDING….OURS…YES OUR MONEY…WE SAVE WITH THESE MAFIA MINDED THUGS…BUT WHERE IS OUR RETURN…..NOT EVEN 5%… not even 3%….bUT THEY CAN CHARGE WHAT INTEREST THEY CHOOSE….LINK THE INTEREST THEY CHARGE US….TO THE INTEREST THEY PAY US…+ STOP THIS DAYLIGHT ROBBERY FROM YOUR CUSTOMERS….

Not sure. If you put a cap on then the resultant loss of revenue will reflect elsewhere, with an increase in either mortgage interest rates /personal loans ad infinitum, they have reached a stage where they can no longer gain by a cut in interest rates on savers. The banks are the same as all the energy providers they are too large with not enough competition. The cake is only so big but they are the ones not us mere mortals or even government, and they determine how it is cut.
The irony of the situation is that the bulk of the time it is our money at nil interest that they borrow but when we want to borrow a little back they scream and charge usury rates supposedly to teach us a money management, what happened in 2007/8.
I rest my case.

John Taylor says:
9 February 2017

I remember the very first case the (so called) Supreme Court tried was regarding the ‘lawfulness’ of a certain charge banks levied. Most, if not all commentators predicted the case would be thrown out. Not so, the court ruled in favour of the banks. Nuf said.