/ Money

We want fairer charges on unauthorised overdraft charges

Pound coins in a clamp

Do you know how much you’d pay if you went into an unauthorised overdraft? A simple mistake could set you back over £20 in charges – hardly fair when customers usually rectify these oversights quickly.

Not to brag or anything, but I’m pretty good with money. I know what goes in and out each month, reluctantly save for boring things like home repairs, and I’ve never ever gone into my unauthorised overdraft.

Until last week, that is. A direct debit that comes in on the same day each month inexplicably arrived a day late, so my mortgage and two of my bills (also coming out on direct debits) put me £400 into the red.

The cost of a small mistake

Swift panic ensued, and I realised that, having never done this before, I had absolutely no idea how much it would cost me – £5? £10? £100? I was horrified when I realised I’d be racking up charges not just for the original mistake, but for each direct debit that left my account after that.

I have two current accounts, both of which charge a daily rate for going into an unauthorised overdraft. One account (the one that went into overdraft) charges £5 per day, but if I happen to have any other direct debits going out on the same day, they’ll charge £25 extra for each.

That leaves me £55 out of pocket. Ouch.

Changes in bank charges

Over the past 18 months, many banks have changed their charging structures and introduced daily charges when you go over your limit. Initially this seemed like a good idea – it’s much more straightforward and people (in theory) will know how much each mistake could cost them. But for many people, unauthorised overdrafts will cost a lot more than the previous system.

After the massive taxpayer bailout, I don’t think it’s fair that banks can charge such ridiculous rates for what amounts, in many cases, to an oversight which can be quickly rectified. Plus, the banks make a huge amount of money from these charges – in 2009, they made £2.5 billion.

Can we force banks to be fair?

When the coalition agreement was drawn up, the new government promised to ‘introduce stronger consumer protections, including measures to end unfair bank and financial transaction charges.’ But sadly this hasn’t happened yet.

The only way we can force the banks to reduce their unfair charges is to push the government to stick to this promise and change the law. If you want to join us in this, you can email your MP and ask them to support our campaign – the more support we get, the more they’ll listen to us.

How much does your bank charge for an unauthorised overdraft – and have you ever been caught out in the same way as me? Tell us your stories below – we’ll pass them on and make sure that consumers’ voices aren’t drowned out by the banks lobbying to avoid reform.

Comments
Profile photo of richard
Member

As the government is renowned for it’s inability to control the Banks and for it’s famous U turns I’m not surprised nothing has happened.

But if you don’t read the small print – you can’t blame the banks. If you don’t keep precise oversight of your balance – you are to blame – not the bank – why should the bank suffer from your mistake?.

Only overdrew once in 1961 – I went to the bank – explained the situation – was given an overdraft facility and a loan. Reduced the problem by getting a monthly statement. Reduced credit cards from 10 to 1 to make tracking easier. Never allowed balance to fall to “Danger Level”.(50% of income) Now check on-line every other day. .

It works well.

Profile photo of dave d
Member

I would have tagged a “thumbs up” to Richard’s comment and also posted a “hear hear” comment, but sadly Richard has included the phrase “…..why should the bank **suffer**….. “.

Sorry Richard, but had you not noticed that the banks (by their own admission in a Channel 4 documentary around 2 years ago, just as the crisis was unfolding) have spend the last 30 years deliberately trying to get the people who can least afford debit into debt so that they (the banks) can make monumental profits from the poorest and most vulnerable in society?

If 100% of unauthorised overdrafts were 100% the fault of the customers and if the bank had a 100% clear record of never ever enticing someone to have credit (borrowing) that they could not afford, then I’d have sympathy with the banks and I’d support you.

But to say that the banks “suffer” when they have preyed upon the vulnerable for at least 30 years I’m afraid makes my blood boil and means that I cannot support your comment.

I do agree, however, with everything you’ve said about how to keep tabs on your finances and avoid nasty surprises.

As for getting the government to change the way that banks charge – get real! I think at the last count there were 29 millionaires in the government – regardless of what colour rosette they wear and what the name of their party, do you honestly expect the members of the government to do anything to hurt the banks when it is the present system that has helped the majority of them to make their fortunes? There will have to be one **** of a massive public uprising to make them do anything, and when thy do, what do you think the banks will do? For the answer to this read last week’s newspapers: the banks have been taxed a tiddle extra and openly announced straight away that they would recoup this “loss” by increasing and adding charges to customers.

Until and unless a ****o of a lot more banks go to the wall (most likely taking the UK’s, EU’s and / or global economy with them) or are 100% nationalised (most unlikely by any government of any political colour) they are out of control.

Profile photo of richard
Member

Dave – I think we are on the same wavelength.

From my point of view the bank is there to maximise it’s profits – it is a business and not a charity.

The problems with banks is simply de-regulation – The idiot Thatcher deregulated them – after the banks had been regulated since the 1920s and never allowed to get out of hand until then and so were stable – Sadly the idiot Blair did not regulate them. Thatchers policies not only allowed Banks to gamble and when the Banks lost due to their own stupidity of over lending to risky borrowers.. Another idiot Thatcher policy of supporting finance not manufacturing simply meant the Banks were too massive and integral to the UK economy that they could not be allowed to fail. Germany and France were not so tied to finance – Germany to Manufacture – France to Agriculture.so they did not suffer the depth of recession we did,

However any business should not be allowed to be penalised by your personal mistakes – the two mistakes are not reading the fine print – and not keeping tabs on the day to day financial balance.- Your Fault – Not the Bank – You pay – not the bank.

There is no doubt the present government will not impose changes on Banks – That has been obvious from the way they have imposed cuts on everyone else – except themselves and the Banks,

Profile photo of dave d
Member

Absolutely agree Richard – all the way on that post!

Member
Tracey says:
6 February 2012

I used to work for a bank.

Richard, if the world was full of people like you the banks would not have made £2.5 billion in 2009 from bank charges. If the world was full of people like you the banks would not have made £9 billion profit per year on PPI that was not worth the paper it was written on.

The banks take advantage of the vulnerable. That’s the way the system is designed. I have previously seen proof of how the system really takes advantage. Poor people on government pension or benefits where they have charges on top of charges. They try to get a handle of their accounts but many do not have the aptitude. It gets on top of them and then the situation just gets worse and worse.

What about families who are on the bread line and can’t possibly afford to make sure they have a 50 % of income buffer in their account just in case. The banks throwing money at people to go into debt and those with less aptitude do not properly consider the consequences about how they will pay this money back exactly. People thinking that if the bank is offering me the money, I must be able to pay it back.

There is a big difference between business and greed. Owned by the richest families in the world who don’t have to even declare their own income because they hide behind an independent state. They finance wars, both sides and have been doing for hundreds of years. They don’t care about the death rate. Where there is war there is money for them so why not finance both sides at once. They own the governments and that’s only a taste of what has been going on.

So when you mention “why should the banks suffer?” I have to add that the banks never do. Perhaps you need to open your mind to why they do not suffer and explore what is really going on. There is a wealth of information if you look for it.

Profile photo of richard
Member

Tracey

I am a Mathematician – BUT – I taught everyday maths to non exam candidates (AKA low ability) in my very slum school in a very slum area – This course devised by me consisted consisted on shopping budgets – mortgages – affordable rents – living within your means – and finance agreements -n other words the arithmetic that everybody should be able to do. So I am VERY aware of the poor and vulnerable – I spent FORTY years working for them – still do for OAPs.

The course included one cardinal rule “If you are behind in payments ALWAYS contact the company quickly to explain what has happened” This was due to my personal positive experiences as follows

One – student loan – during one vacation I earned and spent too freely and my grant was very late so Bank asked for funds – went to bank explained the situation – they asked for “collateral” for the bridging loan – I offered my life insurance – was accepted – paid off when grant arrived as agtreed.

Two – mortgage – I did not realise I was expected to pay one month in advance rather than one month in arrears – I wrote and they added one month to the end of the mortgage.

Three – “bankruptcy” – A dentist I was building a new surgery for went bankrupt owing me £22,000 in the 1970’s (a fortune then) just in cost of machinery installed and I wasn’t allowed to un-install as it was considered part of “His” assets. So I was technically made bankrupt – Went to Same Bank and explained – The Bank Manager said and I quote ” there’s a lot of that around nowadays” – I paid the loan off by working weekends – took three years.

Four – “PPI” I bought a car with a Bank Loan and took out PPI – I was unable to work through illness – the car loan was paid off instantly by one phone call – So many people benefited from properly sold PPI – The problem was MISS-SOLD PPI not PPI of itself – Who miss-sold it? Bank Workers.not banks A wrong move and they are paying it back

Last but not least – To continue the school saga – The children were happy as the course was completely relevant to life – They enjoyed our practical shopping and banking expeditions. The shops cooperated willingly as these were future customers. The children’s arithmetic ability improved.and excellent attedance

Then some weird woman.who knew nothing about the poor – the vulnerable – the intellectually challenged decided to introduce a National Curriculum stopping Everyday Arithmetic in it’s track – The children were then taught totally boring incomprehensible and irrelevant number bases – Venn diagrams – simultaneous equations and other such rubbish with the idea to turn the intellectually challenged into mathematicians – total rubbish – The numbers of children truanting increased.

Who was this weird woman?? – The same one who deregulated Banks and rents – sold off social housing to rich tenants at subsidised rates and caused the Housing Crisis. Name Thatcher “Society Snatcher”

I know an awful lot about the young – the poor – the disadvantaged – and vulnerable – I lived with and for them for Forty years.

Member
Tracey says:
7 February 2012

Ok Richard I take on board what you have written. I have found that it is not only people who lack aptitude who can’t manage their accounts but also people who become depressed and bury their heads in the sand. Stop answering the phones and hope that the problem will go away.

With regards to the PPI it was the banks fault and not the workers. There was no loss ratio to reveal because the banks would have been embarrassed to reveal it. £ 9billion a year, come on!!

The banks are responsible because…

1. They sold it as a single premium on loans. (Thats like buying a car over four years finance, adding the four years insurance to the top of the finance and then adding interest on top of that so you pay one large monthly fee) Rip off!

2. They were not transparent with any commissions that they earned as in accordance with FSA regulation. This was across the board with all the banks. Transparency of fees is a regulation.

3. No medical questionnaires were conducted at the time of taking out the policy. They were essentially covering you for illness but if you had a pre-existing condition…tough.

4. The staff were appraised on their performance to sell PPI. This was pressure. The staff had to have a minimum of 33 % penetration of PPI on their loans or they would not get a pay increase, their bonus would be effected and would have no chance of a promotion. If more than two quarters past and they were not at the 33 % minimum level their jobs would be threatened and would have to go on a PEP for under performance. So if anyone ever wondered why the banks were pushing loans on the public, that’s why.

Profile photo of richard
Member

Tracy –

“I have found that it is not only people who lack aptitude who can’t manage their accounts but also people who become depressed and bury their heads in the sand. Stop answering the phones and hope that the problem will go away.”

That is why I have and and have taught the cardinal rule as stated – but the able people you describe are irresponsible – whereas the poor and vulnerable are often in dire poverty.and can’t help themselves..

I still maintain anyone taking out a loan or overdraft MUST read the conditions of that loan – and as the bank is there to maximise it’s profits – it is not a charity – not paying back a loan is causing losses to the bank – that is “to suffer” – The fact that some PPI was miss-sold is not in question – the banks were and are being punished and made to pay the money back. Which is as it should be.

Profile photo of Nikki Whiteman
Member

Hi Dave and Richard,

I agree that the best way to avoid these fees is to manage your finances well to avoid going into an unauthorised overdraft in the first place – I’m generally *very* good at avoiding this, mainly because I’ve been brought up to be terrified of being in debt. But I think there are far better ways of dealing with this than to charge such punitive rates to people who go into unauthorised overdraft. 2 scenarios:

– The one above, where the date changed on some incoming money (I wasn’t warned of this, but that’s a different rant!) and that then meant that the day my mortgage and bills came out I was charged quite a lot of money for an unauthorised overdraft. I’m a very loyal customer of the bank and a quick glance at my past transactions could tell them that this was not typical behaviour. In this case the fees essentially amount to a punishment, and one that I think is unfair (although you may well disagree!)

– Another scenario, where someone is living very close to their unauthorised overdraft because they simply don’t have enough money going into their account. They end up repeatedly crossing the line, and being charged a set fee each time they do. The fees mount up, and it eventually becomes almost impossible for them to get out of an unauthorised overdraft. In this situation the banks are raking in fees from what is often the most deprived section of society. On this point I think I am in agreement with you, Dave. If it hurts the banks that much to lend unauthorised money then why not make it impossible for someone to go overdrawn? Or why not flag up when someone repeatedly goes into unauthorised overdraft and offer them a better lending solution – one that doesn’t charge such huge fees, and which would have at least a small chance of helping the customer out of debt?

And as a final point – Dave, you don’t seem to think that we’ll ever be able to get the banks to change. I agree that it’s a massive job, and there is a lot to do if we want regulation that makes them treat customers fairly, but I like to think that people’s eyes are much more open to unfair banking practices after the credit crunch, and if we can motivate enough people to speak out about it then they will be encouraged to change their ways! Perhaps I am just an eternal optimist. Do you think there’s anything that ordinary people (the banks customers) can do to make sure that banking is reformed? Which? is obviously playing a part in calling for better regulation of the banks – do you think we need to go further?

Profile photo of dave d
Member

Your response, Nikki, is most welcome and helpful.
I feel that the banks need to be forced to be more honest in general:
Charges imposed on retailers to accept the cards that the banks have forced us all to have whether we liked it or not; on-costs faced by retailers to operate card terminals; the real reason they (the banks) want to abolish cheques; infinitely clearer information on charges; the list goes on and on but these are just items relevant to current Which? conversations.
What we need is fairly wide-ranging banking reform, but the fact that we have recently seen how, when barely touched by the hand of a (naturally banker-friendly) government the banks “thcrewm and thcrewm until they are thick” (If you don’t know the Just William stories apologies that the reference ti Violet Elizabeth Bott – the horrendously spoiled child – will be over your head) and then proceed to take retribution, leaves me fairly certain that we won’t get the sorts of changes that are being campaigned for in the short or medium term future, and maybe not in the long term either.

Profile photo of kindredspirit
Member

My credit card has a policy of cancelling Direct debits if you miss one payment and you can find yourself missing the next month unaware. The credit card company charge me for late payment, the bank charges me for returned payment, overdraft fee, interest. A lot of companies have a rolling date policy of billing every 28 days so your date of bill payment alters each month. Difficult to keep tabs on your bills if you are paid every 14 days. Oh yes my bank used to let me me know in the morning by text if I was or about to go overdrawn and provided I corrected that by end of banking day I was not charged……that went long ago, though I see another bank are promoting that idea on television. I have no issue whatsoever in repaying what I have borrowed plus (reasonable) interest but I do object to tricks and schemes that ensure every last penny possible is sucked from my already empty pockets.

Profile photo of richard
Member

I thought I’d add a further comment.

Having an on-line bank will solve many problems – My balance is always up to date within 24 hours so payments can be adjusted instantly. First Direct also has an automatic unauthorised overdraft facility that allow one to be over drawn by £250 without incurring charges. I have never used it.

I have no difficulties following my daily balance through the on-line statements.

On Credit Cards – I only have one and pay it off every month so no interest is charged.

On not allowing overdrafts – I’m sorry many people are actually quite happy to accept the charges the banks make – why should they be stopped living their life the way they want? A friend basically lives on her overdraft – I couldn’t but she is perfectly happy.

Sadly for the poor they should be more aware of the problems the lack of budgeting make to their lives, and more budgeting advice should be available in CABs etc,

Member
Simon says:
17 October 2012

Seems unfair when It Is the less well off whom have more potential to Incur these charges, never mind you should manage your account better – how can they justify going overdrawn by £4, and hitting you with a £35 charge.

Member
val see says:
1 May 2013

Problem is that the government virtually force people to have their pensions paid through a bank account. A direct debit of less than 10 that takes you a couple of pounds over the limit could be returned with an immediate charge which then makes other direct debits returned. And on and on. Then the weekly credit comes in to the bank but may all be snatched away in charges. Control over bank account and life is lost

Member
Kelly Morris says:
23 January 2013

Natwest bank is charging me £6 a day at the minute plus interest for an unauthorised overdraght. As a family we are struggling financially and a couple of weeks out of the month we are worried where the next loaf a bread is coming from. We have had no spare money to pay anything off this bank account. For well over a year we were paying off just the interest to keep us within our overdraght facility but since things got worse for us we havn’t, that does not matter to the bank they carry on taking the interest and shoved the account over the limit…. is this fair? Why take from the poor? How we ever meant to get out of debt?

Profile photo of malcolm r
Member

Looking at this bluntly, going overdrawn is spending money that does not belong to you. Many banks do offer overdraft facilities that give you a safety net if your expenditure may temporarily take you into the red through timing of income and outgoings. The bank should be helpful if you keep track of your finances and show them how and when this may happen. If you don’t, then the bank can worry that your finances are not in control and that it might suffer a loss you cannot repay. They are not charitable organisations.
Charges made should be justifiable. An independent organisation – FSA? – should agree the upper limits and how the charges can be applied with the banking industry as part of their licence perhaps.

Profile photo of wavechange
Member

I do not want to judgemental about Kelly’s situation. Being in debt can be devastating and the interest charges can be worse than the debt itself. I hope Kelly can find advice and a way out of her problem.

I appreciate that banks are not charities but I do believe that charges should be reasonable and reflect actual costs, rather than making money out of people with problems.

On two occasions I have had an unauthorised overdraft due to my bank taking both the new and old standing order payment for my mortgage. The charges were refunded in both cases but I was horrified to think about what could have happened if I had been made redundant.

It would be good to know if there has been any progress in achieving fairer charges.

Having expressed sympathy for those in debt for reasons beyond their control, I am seriously concerned about those who choose to live in debt because of their profligate lifestyle.

Member
Daniel says:
26 April 2013

Working in a bank I see the biggest complaint being charges. Where I work it clearly reads in the terms and conditions what charges are applied and why. I cant understand when customers kick up a fuss about how unreasonable they are. READ THE TERMS AND CONDITIONS.. how can you agree to something if you dont read the terms and conditions. The bank gives you a current account facility with the agreement that it your responsibility to monitor the account not theirs. The banks are not charities, but businesses.

So lets say you go to the petrol station to fill you car with £50 worth of petrol. and in fact without realising you only have £25 in you account. Which takes you overdrawn by £25. Where I work, it gives you the opportunity to cover the deficit by the end of the working day being 3.30pm. If you don’t cover it up it will charge you £25.

I don’t know about other banks though. The one I work at has the fair fees policy in place. So if you go over drawn up to -£10 the bank wont apply a charge and the list goes on as to what we do for customers.

“Why take from the poor? How we ever meant to get out of debt?” Firstly you shouldn’t be spending money you don’t have and again its your responsibility, not the banks. Agreed overdrafts are in place to help customers who are currently struggling for a short period of time or have an unexpected bill that they just need a little bit of lending to cover up.

It is true that there has been some miss-selling in the past. However I frequently get abuse from customers because I have courageous integrity and say to no extending, overdrafts, loans and credit card limits, because I know that using a carefully laid budget planner and analysing ins and out goings you can have a very clear picture of someones finances. However there are always alternatives and specialist teams in banks to deal with customers in severe financial difficulty. So never hesitate to go to the bank. We are here to help! If you don’t come to us sooner it’ll be too late!

Lets be honest it is going to happen to all of us at one time or another. Contrary to most peoples opinion banks are not unreasonable. I frequently on a good faith basis refund charges, more frequently than my manager would like. I follow the rules set out from the bank, not using loop holes. So I will look in your history and say well you have previously haven’t been charged in the past 6 months so I will refund the charge or the charge was something silly like £150 because your employer was a day late paying you and all your DD went out on the same day and returned.

Never fear, there are people that care.