/ Money

Time to tackle unfair overdraft charges

Business man wearing boxing gloves

Have you ever had to pay overdraft charges? Not only can they be unexpected and unwanted, they are also on the rise, with rates reaching record highs. Now it’s time to talk back and get even.

We all know that feeling – it’s coming to the end of the month, you won’t be paid for a few more days and you’ve got to make your money stretch.

With regular payments and direct debits coming out of your account, it’s easy to exceed your overdraft limit – and face a hefty charge at the same time.

Changes don’t go far enough

Charges for unauthorised overdraft charges are still an issue for many consumers. Some banks, such as RBS/Natwest, have made changes to how they charge customers. But, as our Money Editor James Daley said in a recent Conversation, ‘there’s definitely still room for improvement.’

If today’s figures, released by the Bank of England, are anything to go by, this is some thing of an understatement. They revealed that rates for authorised overdrafts reached a record of 19.09 per cent in October, meaning the typical customer who goes overdrawn is paying 38 times higher than the base rate of 0.5%.

This is what our banking expert Rebecca Fearnley has to say:

‘In spite of recent changes, unauthorised overdraft charges remain complex and are difficult to compare. On the whole they are still too high and we think they are disproportionate to the cost to the bank of providing the overdraft service. If you think you might be about to go into the red, it makes sense to arrange an overdraft with your bank before it happens and avoid any unnecessarily high charges.’

Join our campaign for fairer charges

Thankfully, we’re not the only ones to be concerned. The government is now calling for evidence on a wide range of credit and consumer issues – one of which is unauthorised overdraft charges.

Of course, we’re writing to the government urging them to end unfair bank charges, but it’s input from real consumers that makes a stronger case.

If you’ve ever been affected by overdraft charges, now’s the time to get even and email the government directly about your experiences. We know from experience that this approach works – in the past, your emails to MPs about confusing energy bills and tariffs helped to make sure that Ofgem’s proposals were tough enough.

But don’t just tell them – tell us too. We all have our own horror stories of grossly unfair charges and unhelpful banks. Armed with your stories we have a better chance of persuading the government to take action.

The government stated firmly in its Coalition agreement that it would ‘introduce stronger consumer protections, including measures to end unfair bank and financial transaction charges’. With your help, we can make sure it sticks to this pledge.

Sophie Gilbert says:
9 December 2010

I agree that we absolutely must tackle unfair overdraft charges. However, in the same way as it is relatively easy not to receive speeding or parking fines (don’t speed and don’t park where you shouldn’t), wouldn’t it be a good idea to try not to spend more than you earn?

I heard about some people who managed to reclaim their overdraft charges. I’d love to hear more about that. I have lost a lot of money due to overdraft charges :/

In the past I was hit by one overdraft charge – I simply rang up and said it was an accident and that I had money to put in the account. They refunded it. I doubt they’d do the same if it wasn’t my first ‘accident’.

As long as banks make their charges clear and transparent why shouldnt they be allowed to offer accounts which penalise those who don’t manage their money and take an unauthorised overdraft and reward through zero charges and interest those of us who keep our accounts in credit.
As long as there is a range of accounts on offer from several providers, with maybe an option of an account with no credit facility at all I do not see the problem.

I had an interesting experience on December 24th this year.
On Dec 22nd a cheque that I had written to a charity for a donation of approx £250 reached my account. On the same day, using on-line banking and “faster payments” I paid a significant sum of money into my account.
All appeared instantly on my account, according to on-line banking and there was no question of my being overdrawn at all.
On Dec 23rd I logged in to on line banking again and was pleased to see that I had a nice little reserve of money there after the previous day’s transactions. I went out and shopped for a few last minute items of grocery.
On Dec 24th I logged in to see if my shopping transactions from the previous day had gone through and was shocked to see that my “faster payment” made on the 22nd had mysteriously now been ammended to show it being made on the 23rd, thus meaning that the cheque to the charity, which had been paid, had taken me overdrawn by about £100. There was also a list of charges shown as being aplie on Dec 23rd, including a paid referral fee £25, and unauthorised overdraft fee £25, a daily overdraft fee £15 and a “service charge” £8.

I rang my bank and the operator took my details and attempted to tell me that I had made the payment on the 23rd and thus had been overdrawn over one night. I explained to him that this was not the case and at first he said that I must be mistaken but then I told him that I had looked on line and had printed off my statement showing the transactions. Suddenly he changed his story to say that he could see that the payment into my account had been made on 22nd Dec and he was able to tell me the time of the transaction which I agreed with. He went on to say that “the bank it had come from had made some security checks and this had delayed the payment being credited to my account” and he asked if I knew where the money had come from. This shows some degree of downright dishonesty on his part or else incompetence because I said I did know where it had come from, my own savings account at the same bank which I could see on the same screen of on line banking and surely he could too?
There was a short pause before he said that yes, he could see that. So I asked again why the date had been changed, to which he made no response. I then said that I was sure he could “see which way my suspicious mind was working, and that to me it looked unpleasantly as if the bank had noticed the cheque and the payment on the same day and realised that if the payment had been a day later I would have been overdrawn and therefore they could make charges”.

The operator did not deny this, though of course he most certainly did not agree that it had happened, but he did say that he’d transfer my call to the lending department to see if the charges could be refunded.
To cut a long story a little shorter, lending agreed at once that the payment had been made on Dec 22nd and they immediately refunded the charges.

So, why am I telling the world this? Well, I can see little opportunity for even more UNFAIR overdraft charges than this, and in response to rarrar (above) I don’t think that this was an example of “TRANSPARENCY”. I also think that it shows that we have to be exceptionally eagle eyed to make sure that the banks are behaving in a professional manner.

I wonder if anyone else, especially anyone who has successfully reclaimed charges, has experienced anything like this?

I vaguely agree with the first poster on this topic, that people should just avoid spending more than they earn to avoid the charges – but having been a victim in the past of bank overdraft charges it should be mentioned that once you’re in the cycle it’s extremely difficult to get out. I got a loan from a bank to combine all my credit, not realising they’d included my salary going in the following day when they calculated how much I’d need.

They gave me £200 for the month which I could live on and I agreed to – but ignored my direct debits. Upshot was that within a week I was overdrawn and by the end of the month I had been charged £150 fees. I’m not sure how anyone else would fare but losing £150 a month only drove me further into my overdraft with the added finding that my bank would not give me any increase on my loan. It took 18 months to work my way out, so I can easily understand how people might end up living in an overdraft. In theory I fully appreciate that bank will charge customers for going overdrawn – but I think their charges are inflated beyond belief considering the actual effort that they go to. An advisor confirmed that I was given an authorised overdraft but that the bank also had an unofficial overdraft for me, which meant that they had a limit for how much unauthorised overdraft I could have. As far as I can see, they pretty much eliminated the risk in giving me an unauthorised overdraft while keeping me as a cash cow for the forseeable future.