/ Money

Have the CMA’s banking fixes fallen short of the mark?

Bank fix

The Competition and Markets Authority (CMA) has today unveiled its grand plan to improve competition in banking. But we think the proposals have fallen short of the mark.

Back in October, I wrote about the CMA’s recommendations for improving competition in banking. And it’s fair to say pretty much everyone, including many banks themselves (well the challenger banks at least), was left feeling underwhelmed.

But to the CMA’s credit, they did say they’d go away and take suggestions on board. Well today’s new, updated proposals show that sadly, not much has changed.

Better banks

The problem is that the cost of using a current account depends on how you use it, but charging structures can be complicated, and pretty expensive if you slip into an unarranged overdraft. And despite banks rarely achieving decent satisfaction ratings, people don’t switch, leaving the big four banks with a dominant market share.

So if you throw in relatively low satisfaction, disillusioned customers thinking all banks are the same, and a small group of customers being charged through the roof, but not switching and not being helped to manage their situation, the diagnosis is not good.

Now there are some recommendations in the CMA’s report (PDF) that are undoubtedly good.

Recommendations like making banks regularly prompt their customers to check they’re getting good value from their provider, and making switching easier, are sensible housekeeping stuff that, in truth, banks should be doing anyway.

There’s also already been some good progress made on a new app to help people compare what bank is best for them, based on their actual account usage. Plus proposals requiring banks to alert people when they are about to go into their overdrafts, and giving them grace periods to avoid charges – these are certainly welcome steps in the right direction.

Fallen Short of the mark

But where the CMA has fallen short is what they’ve billed as a ‘cap’ on unarranged overdraft charges.

In reality, it’s not much of a cap. Banks are only being required to set their own maximum monthly charge and disclose this to their customers. It fails to mention that some banks already have a limit on the monthly cost of unarranged overdraft charges.

Also, while the CMA believes that transparency will help customers compare and encourage them to switch to a cheaper provider, it does so in the knowledge that heavy overdraft users are the least likely group to switch.

And if any of you are wondering about customer service in banking – well the CMA is proposing to require banks to display a small number of core indicators of service quality, like willingness to recommend the bank to a friend. There are also proposals to publish other quality measures to help people compare between providers.

But it’s not yet clear how this will work. What we’d like to see is some customer engagement, to test whether the information being presented is what people actually want to know.

Next steps

While this is technically only the CMA’s provisional decision, after almost two years or investigating and rejecting calls for stronger action, it’s unlikely it will change its mind.

So it’s now over to the Financial Conduct Authority to implement the CMA’s remedies and judge whether they go far enough.

What do you think? Do you think that this a missed opportunity to improve banking?

Do you think banks that hit customers with unfair charges should be held to account?

Yes (99%, 4,903 Votes)

No (1%, 38 Votes)

Don't know (0%, 13 Votes)

Total Voters: 4,954

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My reading of banking things it seems the big problems arise when people overdraw. Why many so many need to overdraw is a mystery to me. Can’t the majority of people manage their finances if you what you earn then why spend more than you get. The ease of getting credit is the main problem in the world today I have No complaints about my present bank or any I have banked with in the past but I have never overdrawn because I do not buy anything without having money somewhere to pay for it with even when I use my credit card .I got a loan to buy a car but know I have the income to pay the amount every month

mike Alexander says:
18 May 2016

You need to remember banks are just another feather bed mattress for failed politicians. Oil and Insurance companies, and of course the EU. Is it likely the Directors are going to adjust their business criteria to suit the public. Never! Not until they become personally liable (like Lloyds members) for their mistakes, and so long as our Politicians have a hand in lawmaking that’s on a long finger then.

The move away from cash transactions to everything being done through the banking system means that people are held virtual prisoner to the whim the the banks who seemingly, behind our backs, run a cartel, secretly fixing the system to suite their own ends, screwing the customer with unfair charges, excess costs and p**s poor service.
The banking system needs to be opened up to more competition.

Once again Cameron has told the CMA to go easy on his mates in the banking industry. The entire banking industry is self governing. It tells the politicians what the bank requires and the government complies.

Barbara says:
18 May 2016

Think it is good that the co-op have now also introduced a “loyalty” scheme whereby you are paid £4 per month if your account is in credit, you opt fo paperless statements, have a certain number of direct debts and you log on to their website. In addition an extra £1.50 per month can be earned by using their debit card.

Closed my account with Saga Visa two months ago —-Credit balence still not returned, despite two convoluted telephone calls and one letter, culminating in their assurance that a cheque would be forwarded within 7 days.
Blatent application of the “Fatigue Client Ethos”.

I do think that the banking system is grossly unfare to savers and to borrowers alike, if you have some savings many banks only give you a very low percentage some as low as .05% interest for the privilege of putting your savings with them but on the other hand if you want to borrow some money the interest is very high in comparison now I appreciate that they have to make a profit and pay for the administration but it does seam to me to be way out of proportion, I also understand that there is a high risk in lending money, but surly it is the banks job and responsibility to reduce such risks before making loans as well as being fare to there customers savers and borrowers.

Bank interest rates are low because they don’t need your money – they have sufficient from the general market. You can, if you shop around, get up to 1.65%. Alternatively rather than letting the banks invest your money you can do it yourself and support industry. An average dividend return of 3.5% should be relatively easy – but your share value might go down as well as up. Or you could, if you want to make an effort, do online buying and selling for example.

Just expecting to get a good return by making no effort is unreasonable. it is about risk and effort vs income.

James says:
18 May 2016

At least Dick Turpin had a mask.

Perhaps, seeking a swift getaway, ’twas he that first spake “bring on the black horse!”

Keef says:
18 May 2016

When I first joined santander
I was offered a free overdraft service
I now pay £30 a month….fees
And £5 for the privilage of having a bank account with then..pah
I am going to pay off my overdraft and get rid of my account with them….biggest con

“The move on overdraft charges was welcomed by Gillian Guy, chief executive of Citizens Advice, ”

I think they have left off the CBE awarded to her in the 2015 New Years Honour list.

“Announced April 2013
” Banks and consumer groups are to work together to deliver real change for high street banking customers, the British Bankers’ Association announces today. The BBA is launching a new Consumer Panel chaired by Citizens Advice Chief Executive Gillian Guy which will meet for the first time in the coming weeks.The aim is to bring together consumer advocates, leading charities and senior bankers to identify areas where banks can improve the service they offer to customers.

The industry has already identified some areas where they want to make progress such as:
-simplifying the small print that banks use
– making savings rates easier to understand and compare
-looking at providing help to people with serious illnesses or physical disabilities to allow them to delegate to carers the ability to bank on their behalf
-helping customers with critical illnesses such as cancer before they go into arrears on mortgage re-payments
– improving access to bank branches such as providing wheelchair access to all services and installing talking ATMs

The BBA is also setting up a new Service Improvement Group of senior bankers which will drive forward implementation of the changes agreed at the Consumer Panel.

Consumer Panel Chair Gillian Guy said:
“This is a big step towards improving people’s everyday experiences of the banking sector. Members of the panel will be able to bring the problems they see on the ground right to the heart of Britain’s biggest banks.
“There will be some hard truths but also I hope some imagination, invention and collaboration to make banking work better for customers.”

It looks like the BULLY BANKS win again.

You state that people being hit with unfair and expensive overdraft charges should just “switch”……how do you propose they do that when they have a bad credit/banking record? the banks charge these people the way they do because they can, safe in the knowledge that they usually cannot go elsewhere

If people have a bad record then they need to deal with that by getting their financial affairs in order. Banks are not charities to support one group of customers at the expense of another group. I’d suggest they talk to their bank to get help to sort out their finances, or another institution like the CAB.

Charges for unauthorised overdrafts should be “fair” but equally should dissuade people from using this as a regular means of getting loans they may not be able to afford, nor be in a position to repay. Negotiate an above-board method of covering short-term money shortfalls – an arranged overdraft, a credit card for example. If the shortfall is long term, not short term, then other measures need to be adopted.

I have my main current account with a Building society. Three of the major banks have succeeded in upsetting me in the past. NatWest and Santander made apalling charges whilst Barclays, having taken over Woolwich, lost my mandate and put unfair limits on the amount I could make in Bill payments at a cash machine.

Unlike some of the unfeeling folk on here, I have every sympathy with those who have found themselves overdrawn by mistake. It is quite ridiculous that banks should make so much money from those least able to afford it. The charges bear no relation to the actual cost to the bank, which is merely an automated response requiring no human input.

“those who have found themselves overdrawn by mistake.” I have every sympathy for these people. However, Which? seems to suggest that sympathy should be extended to those who regularly go overdrawn without asking their bank for an overdraft facility. I would much rather we put the effort into helping people to manage their financial difficulties. The key is to ensure that outgoings do not exceed income; if they do then for the genuinely needy state help should be provided. Others may need to look at their spending priorities.

What I believe is that banks should not allow people to go overdrawn without an agreed facility as Patrick Herbert suggests above. There might be charges for cancelled Direct Debits but not for refusal to authorise card transactions. Charges would be very small, reflecting the electronic nature of the process. I do not wish to punish those who are unable or unwilling to manage their money properly. Nor should the banks feed / create a habit for unauthorised borrowing.

I don’t understand why this kind of unauthorised lending is allowed under Consumer Credit legislation.

As usual with this topic we get into language difficulties because nobody will call an over-drawing what it really is: a loan. It is unauthorised borrowing, not unauthorised lending, that is the problem, i.e. borrowing money without asking. If you want a personal loan you have to pay an arrangement fee and make interest payments on the amount borrowed. An overdraft is a different sort of loan where the interest is payable on the the debit balance outstanding on the account and this can fluctuate according to the ins and outs of the account. The charge for this facility compensates the bank for the irregularity and indefinite duration of this kind of repayment. Banks realise that customers appreciate a simple way of getting access to extra money [i.e. getting into debt] from time to time without having to go through the hoops and over the hurdles of getting a personal loan so, purely as a commercial proposition, they have created easy-access overdrafts with no questions asked – an ‘automatic’ one that is pre-authorised and only charges interest, and an unstopped credit facility, that they call an unauthorised overdraft, for when you spend beyond your limit but haven’t asked permission. This incurs a charge as well as interest but it saves the embarrassment and inconvenience of having cheques stopped and direct debits returned. An alternative way is to use a credit card but interest rates might be even higher. Charges for unauthorised overdrafts might be regarded as a ‘punishment’ but they surely must include a deterrence element otherwise some people would be permanently in excessive debt. If such a situation were to arise either the bank would have to close lots of accounts or to withdraw unauthorised overdraft facilities for everybody. Since the technology is available to issue alerts as people’s accounts approach their authorised limits this should increasingly be the way forward but the charges would still be there as an incentive to regularise the position as soon as possible.

For some time now, I have had my Barclays account set up to text me, if its balance gets close to zero.

It might help if banks were to supply such facilities by default, as opposed to only on request.

Derek P, I agree that banks should be encouraged to contact people when they might be incurring or approaching an overdraft. However, they need permission to do this from the account holder – they would not necessarily have your mobile phone number. The initiative should be with the account holder to request appropriate communication – phone, email or letter – and the bank should clearly publicise this facility and make it easy. The account holder should be responsible for any reasonable charges – preparing and delivering a letter, for example.

It is definitely unauthorised lending. In all other borrowing situations, the lender must undertake due diligence to check the creditworthiness of the borrower. Without doing so, the loan is against the law. People would learn quicker and better how to manage their money if banks prevented unarranged overdrafts but, as others have said, the financiers want us to get hooked on borrowing as young as possible.

In all situations of “unauthorised overdrafts” the borrower is an existing customer and the bank would no doubt claim that its due diligence was carried out when it accepted that person as a customer. Banking relies on mutual trust [!] and due diligence is not a rolling process. To the extent that there is nothing in place to stop people overdrawing beyond their approved limit [which might be zero in some cases] the lending is authorised by the bank that tolerates it; charging for it probably legitimises it even further.

John Coueslant says:
19 May 2016

I do not trust this far right self serving Conservative Government. They should be removed from power. I did not vote for them and I am not sure why the public voted for them a second time-worse than George Bush being voted in twice!

I voted Conservative for the first time, because I remembered that the banking crisis had occurred on Labour’s watch. I suspect many others did the same.

We will, of course, never know what would have happened if another political party or coalition had taken power. However, we are better off now than when we were just after the crisis. Not worse off. whatever the reasons, the policies or the luck that might have caused that to happen I am very relieved. And we have done better than much of Europe

We will face the same dilemma in the EU referendum. No facts, only childish attacks and opinionated rhetoric from all sides. So there is no easy way of making your mind up, and we will not know whether we made the right decision if we stay. If we leave and see the rest of Europe do better than the UK (apart from maybe Scotland) then we will know whether the decision was, economically, right or not-so-right. Someone justified leaving the EU on the basis that we – the UK – won the second world war. We didn’t – only the combined efforts of the bankrupt UK, the Commonwealth, the USA, Russia and much of Europe managed to do that.

Sorry – something went wrong when I edited this comment to remove the bit about the referendum – it was off topic.

What I meant to include instead was that irresponsible borrowing and lending at both corporate and at personal levels helped to fuel the 2008 financial crisis. “Borrowing” unauthorised money from banks is an example. We need to behave in a financially responsible way at a personal level, just as we expect others to do.

Ken Tuohy says:
19 May 2016

Why is it the responsibity of the customer to find out if they have PPI claims, surely it should fall on the banks to track down the victims and by law refund them.

Whilst I totally agree the “CMA’s banking fixes” fall short of the mark, there are however other even worse banking swindles being imposed on those who use banking services. One could easily believe (and many do) through an extensive financial worldwide power network, they are able to control all governments too at the least cave-in to this excessive group power without even having to pass wind, let alone blackmail, make threats or even bribe any one. Bank interest rates (more correctly lack of any interest paid and threats to charge savers) are absolute disgraceful and it’s even more disgraceful that governments are implicit in supporting such obvious rip-offs of those who struggle to save. They give all sorts of incentives, to get people to borrow (many would say inclusive of entrapment) far more than many can afford to pay back, yet claim they make no money on saving accounts, openly declaring their money is made on lending. Whilst it is an accepted fact by all that banks use their patrons, the depositor’s money to profit from making investments, their business mode should not that of a money lender.

Too obscure !Never sure that you are not being ripped off,or could do better elsewhere. Simplicity and upfront clarity is needed everywhere. We are still not getting it so we have to assume that the government don’t want it. Honest ,open honest society is what we want, starting with our leaders !!!!

I don’t see what moral right people have to complain about high unauthorised overdraft charges. Taking money that doesn’t belong to you without permission is theft, pure and simple. Sure, I think there should be a small amount of leeway to allow for accidental overdrawing, but I don’t see that people who quite deliberately go over their approved overdraft limit month after month should expect to get away with it without consequences. It isn’t really fair on other, more responsible, bank account holders, in my opinion. If you need an overdraft, arrange one with the bank beforehand – it isn’t that difficult!

I share your view Clare. I suspect that people who need to go into debt would prefer not to have a discussion about it with someone at their bank and like the easy way they can spend money they haven’t got without having cheques stopped and direct debits returned which might put them in bad odour with their creditors. It’s a natural extension of that thinking to suppose that they shouldn’t have to pay much for that indulgence and its considerable benefits for them.

Last time I was in court (on a jury!) we were advised that, in legal terms, theft involves taking something with no intention of ever giving it back.

DerekP, if people have every intention of repaying their bank when they take money in excess of their account balance, then why do they not do the courteous businesslike and financially sensible thing – ask their bank for an arranged overdraft facility. It is simple and cheaper if you need to use it. If the bank will not give them a facility then maybe they regard the applicant as a bad risk. Why should any business give credit to someone who they think might not repay?

Clare – Providing an unauthorised overdraft is a service offered by banks. As far as I know, banks are not obliged to offer these overdrafts.

Obviously there is a risk that individual customers default on their loan but until someone provides evidence to the contrary, I will continue to assume that the providing unauthorised overdrafts provide worthwhile income. Until the banks justify their charges for unauthorised overdrafts then I will continue to believe that they are exploiting those who fail to manage their finances. I manage to stay in credit but it concerns me that the banks may be exploiting people facing crises such as unemployment, illness and family problems. It’s important to distinguish between these customers and those who are just careless about money and regularly spend beyond their means.

I agree that banks have painted themselves into a corner here. For most customers they leave the door open to a withdrawal that exceeds their funds but charge heavily anyone who goes through that door. It is inevitable that this burden will fall on those who are clearly in financial difficulties already. I presume banks charge what the market will bear, and I cannot see any viable alternative to that short of a government regulation. As soon as a customer steps into overdraft territory without prior notice the bank should be seeking to set up a meeting to explore their needs and resources and draw up a recovery plan. Personal service and advice like this would also come at a cost but one that initially the banks should bear. I agree that people “facing crises such as unemployment, illness and family problems” should not be exploited, but there is usually an alternative resolution to the financial problems these circumstances give rise to other than an unspecified indefinite debt at high rates and charges.

It is true that banks are not obliged to enable unauthorised overdrafts; when someone goes beyond their approved limit they could immediately stop cheques, return direct debits, use any new income to repay the overdraft, and effectively ruin their customer. Nobody wants that. Banks have to accept that people’s lives have ups and downs, but people also have to engage with their bank. The headlong rush into automation of every part of the customer relationship is partly to blame for the present position and it is quite obvious that banks do not know their customers at all until something awful happens.

It has been said from time to time on this topic that people who have had serial unauthorised overdrafts cannot switch to another bank, which puts them in a trap that enables their bank to take advantage of them. I am not sure whether that basic premise is true given the eagerness with which credit card companies promote debt transfers as a means of acquiring more customers. Obviously the bank they wish to switch to will carry out a thorough assessment before agreeing to take them on and set out the terms and conditions which could be significantly less favourable. My expectation would be that the existing bank would see what they could do to help their customer, but in return they do expect customers to be upfront with them, tell them the whole truth about their financial situation, and not to make a habit of spending more money than they have.

People – customers – need to act responsibly. Their overall financial situation is only known to them, and if they have a financial crisis that changes their situation they need to talk, among others, to their bank(s) to see how it may best be dealt with. We need to put the horse before the cart and help people deal with their finances in a sensible and responsible way. Blaming the banks is not constructive. Putting proposals together to help people manage their finances is and I would like Which?, among others, to focus on this. Do something positive to help people. Tinkering with charges might help a minority, but it will not address the real problems many face.

If tinkering with the charges helps the minority that are facing major problems in their life then it’s worth doing.

We want to help them. not paper over the cracks. Why does your minority have regular unauthorised overdrafts (and regular is what I am criticising) and why do they not arrange a facility with their bank? it may well be that charges for theunauthorised use of banks money are justifiable. Certainly the ones my banks have sent me are changed for the better.It might be Which? could tell us how much they would recommend charging, bearing in mind that I hope most people do not want to encourage unauthorised overdrafts.

Far more constructive is to help this “minority” and others to get their financial affairs under control. Barclays, for example, have a site open to all at barclays.co.uk/moneymanagement. This has a budget planner for expenditure and income, a benefits calculator, overdraft information (and an “apply” button) with a cost calculator, sections on current account charges, fraud prevention……etc. I doubt Barclays are on their own in providing this help. I’d suggest as well as criticising the banks, Which? could provide links to such sites (or do their own version) and aim to provide help as well. Some people are frightened to face up to money issues; anonymous help like this might be useful to them. CAB might be useful to others. Where there is family they should step in to give advice and help.

There is also the CAP (Christians against poverty) money course.

I should like to see much more education on personal finance provided by schools [er, I’m sorry . . . I mean academies, or whatever they’re called this week].

If you’re talking morality here, you’re forgetting that the Bank has all the power here and many more choices. So if l leave pound notes lying around in the open and people take them for keeps, that is indeed theft on their part. However even the most cursory moral examination of my actions shows that I have, wilfully or carelessly, left temptation in the way of others. That makes me morally culpable for their theft.

I also question whether denying payments to a customer without funds is the worst thing a bank can do to someone. Allowing them to go into unauthorised overdraft may be much more damaging to them in the longer term. I am certain that a bank’s permitting that initial transgression is the beginning of a slippery slope of financial irresponsibility for many people.

I entirely agree with you Peter. The banks have certainly failed on the “lead us not into temptation” test and, as I suggested earlier, are not innocent bystanders. They are doing very little to prevent people falling into the trap that the banks have set for them and then, a long time before they extend a helping hand to pull them out, they add to their misfortune with charges that take them over their heads in debt. This is not an ethical approach.

Banks have forgotten that there is another way of dealing with overspending: their binary brains seem to be limited to either letting people dig themselves deeper into debt, or cutting off their facilities and driving them into the hands of even more unscrupulous sources of money. Banks should do a lot more talking to their customers and apprehending their cashflow problems at an earlier stage and then helping them with solutions, not adding to their problems. More certainly needs to be done to curb the culture of running on an empty bank account.

Malcolm wrote: “We want to help them. not paper over the cracks. Why does your minority have regular unauthorised overdrafts (and regular is what I am criticising) and why do they not arrange a facility with their bank?” It’s not my minority, though I do care about people less fortunate than myself.

Education will help but there have been people who cannot manage money for generations and I do not envisage that the problem will be overcome if we just push people to manage their money properly, any more than pushing people to switch energy supplier will result in everyone getting a fair deal. As I see it, the fundamental problem is our consumer society and the obsession with spending money.

Credit cards have made it wonderfully easy to spend money that we have not got. While some of us manage to use them responsibly many end up paying high interest charges for not paying off the balance at the end of the free credit period. Mine are paid off by standing order and if everyone did this, credit card lending would not be viable for the companies.

In our parents’ generation, hire purchase and other credit existed but many people managed to save money and buy when they could afford to. Rather than funding people with the motivation and ability to go to university, successive governments have pushed up intake numbers and pushed them into debt via student loans. Thankfully Scotland does not condition young people into living in debt in this way.

Going off topic for a moment, I would like to see every Which? product report inviting readers to ask themselves some questions such as: Do they really need to replace a working product? Can the existing one be repaired? Do friends and family have an unused one gathering dust? Until this happens I will still think of Which? as the Consumerism Association.

I agree with you Wavechange, but I get the impression that some people run out of money towards the end of the month not because they have bought a new home appliance or new clothes but because they are in a spiral of commitments to [in no particular order] mobile phones, energy bills, satellite television, extended warranties, broadband and ISP’s, Council Tax, on-line shopping, mortgage or rent, lotteries, home and car insurance, downloading music, films, games, etc, all of which add up to a permanent drip, continuously draining their money out of their accounts until they are empty. Being able to manage all these outgoings is incredibly difficult, and that is not a cultural failing or the result of conditioning I would suggest. Some of the things that are raiding their bank accounts are subject to long-term contracts or other tie-ins which make it hard to go one or two steps backwards in such expenditures and revert to a former service standard or a cheaper tariff. I certainly agree with your comments on government policy on university places and the consequences. It will be interesting to see how students who have enjoyed the Scottish system compare with their peers in the rest of the UK over time.

I totally agree that we are in a society conditioned to spending money on unecessary things. One way of putting your financial affairs in order is to look hard at what you need, what you can afford, and not expect someone else to pay for it.

It has beed said that banks should not allow unauthorised (unarranged, if you prefer) overdrafts. Whilst I agree to some extent, banks (at least the ones I deal with) publish the charges they make and copy these to their customers so unless you ignore your post there is no excuse for not knowing what might happen. However, if banks refused unarranged withdrawals then DDRs for house insurance, car insurance as examples could be returned unpaid. If your house was burgled, had a fire, if you had a car crash or your car was stolen, your insurers might then refuse to pay out. Their are two sides to these arguments and I would not want essential payments to be denied that could seriously affect people. There needs to be some leeway, but the aim should be to educate people to handle their affairs responsibly.

Education will help but there is not a remote chance of it solving the problem.

The commercial world has made it far too easy for us to spend our money. Credit cards, websites that make it incredibly easy to spend, auction websites, contactless cards (even on pub bars), phone payments, etc. It makes me wonder if it is the intention of the banks to encourage us to live in debt but they don’t seem to be putting in much effort to stop it.

I would like to see the introduction of credit cards where the balance was, by default, automatically paid off by direct debit at the end of the free interest period.

Deciding how people should choose to run their lives is not a state I would like to belong to. Making people think for themselves, taking responsibility for their actions, learning perhaps the hard way in some cases (and who among us have not learned many of life’s lessons this way?) will be much more productive than imposing the nanny state. What we must ensure is that those who cannot look after themselves for whatever reason are helped; we need more attention paid to the genuinely vulnerable.

A credit card for many is a useful tool used properly. It should not be denied to everyone who is responsible simply because some misuse it. No more than dreaded payday loans – I think they should be banned, Which? did not if I remember rightly, so for some these might provide a solution to a particular problem. Education is the key for the vast majority who want to behave responsibly,

I would not like to see credit cards restricted so severely. I find it useful to have two credit card accounts, one is set to be cleared in full by direct debit each month, the other requires me to write a cheque and send it in. It has been expedient on occasions to repay the balance on the second card in two or three instalments rather than breaking into savings and I should not like to lose this facility even if it is rarely used.

I wasn’t quite sure about your second paragraph, Malcolm, in relation to payday loans. Now that tighter regulations have started to bite, the payday loan sector has seen a massive fall-off in profits and several firms have closed. I think such loans are still dangerous but, responsibly used, they have a place in short-term or emergency funding and can help to keep people out of the jaws of loan sharks or away from criminal activity. I think the lending institutions have a major responsibility to inform and educate their clients.

I’m suggesting that the default should be that credit cards balances should be paid off by direct debit. If a customer would like to borrow money for a longer period then this should be discretionary. As you have pointed out, some people are regularly having problems with keeping in the black, and they are not the ones who should automatically granted credit.

I think the big problem with that idea is that, in those cases of rolling debit balances on credit card accounts, there is possibly no credit balance in the card-holder’s current account either so the DD from the credit card company would be returned unpaid.

Banks do routinely return DD’s when there are insufficient funds in the current account – they don’t just allow an unauthorised overdraft to accrue; they also stop ATM withdrawals. What they cannot easily stop is the use of cheques and these are probably the most likely causes of excessive overdrawings. They might exercise some discretion over mortgage or rental payments but that would require personal intervention by the bank. It depends on what bells are rung in the bank when a customer goes over the line.

A year or two ago I had diarised the transfer of funds from a savings account to my current account to cover a large credit card bill at the last possible moment. I had not realised that the direct debit was dealt with at the beginning of the banking day whereas my internet banking transfer was around midday. This caught me out, the DD was returned to the credit card company, and I had to pay them a fee for re-presenting it plus interest back to the statement date. The bank also charged me a small sum for returning the DD.

I think the profiteering that took place with payday loans was something that should have been stopped, John, but even Which?, from memory of the select committee, did not seek to ban them. Even now they attract around 1300% interest. I think the ease with which they are available gives a short term fix, but long term problem, to some financially vulnerable people, just like the “service” from loan sharks. However, I accept there may be circumstances when, properly used, they can be one way (albeit expensive) of sorting a very temporary problem.

We now have financial stress tests for people taking out mortgages. That is very sensible. Perhaps it should be the same for anyone taking out a loan? To help them ensure the loan was not going to adversely impact their financial viability?

I tend to agree with you Malcolm. This is what bank managers used to do, in a courteous manner, when people applied for a personal loan or an overdraft facility and they set the amount and terms for it. Let’s not overlook the fact that mortgage lenders charge very high arrangement fees for setting up a mortgage; banks would presumably have to do likewise which takes the impecunious back to square one.

You’d then have to ask why the impecunious (with little income or assets presumably) need a loan that it would seem they cannot afford. If they are in poverty then benefits should come to the rescue. If they want a loan for “discretionary spending” then it is about priorities, I think. So impossible to generalise; it would be useful if the discussion of overdrafts looked at why they were necessary and for how long so we better understand what is going on.

I am hard of hearing and rely on my hearing aid. My bank has recently been refurbished and it seems that the hearing loop has been completely forgotten and lost in this process. No signs, nothing. I can lip-read quite well but lots of deaf people can’t. I asked why no hearing loop and was told that I could borrow some head-phones so that I could use an ATM machine! So no personal service if you are deaf!

I am glad you can see some humour in this situation Judith but it is actually quite outrageous that a bank would behave in this way. It is a sort of compound discrimination. Not only does the bank not wish to facilitate people with hearing loss or impairment from performing normal functions in an effective but discreet manner, but its method of solving this problem is to make you look conspicuous by having to ask for headphones and to use them to operate the ATM. I just hope the refurbishment did not include the infliction of noisy muzak in the banking hall. Personally, if I were in your shoes, I would write to a senior representative of the bank and ask them to explain themselves. This treatment is utterly indefensible. It is possibly a breach of the Chronically Sick & Disabled Persons Act 1970 and the Disability Discrimination Act 1995.