Outrageous Bank Charges in the UK
Bank charges have come under a lot of fire recently as the number of customer complaints have rocketed in the face of overdraft penalties, PPI charges on loans, late payment fines etc.
Previously for example the banks used to charge very high penalty fees for unauthorised use of their overdrafts - around £25 to £30 per day that the customer was overdrawn. Usually these fines would be applied for three days if the account wasn't brought up to date, so the final charge could be nearly £100. Sometimes this could happen twice in a month as well and if a customer didn't check their account regularly, it was hard to keep an eye on whether they were in danger of going over their overdraft's agreed limit. These overdraft penalties were deemed by the bank to be acceptable due to the administrative cost that the bank incurred by processing these transactions, but as customer complaints to the Financial Services Authority (FSA) increased, they began an investigation into the legality of these penalties.
Since then it's been deemed - although as yet untested in the high court - that these penalties were in fact excessive and possibly illegal. The FSA deemed that an appropriate charges would be closer to £12 and thousands of Loans customers have since argued their case against the bank, reclaiming the bank overdraft charges and often claiming back the years of interest in addition. Currently most of these banks have put a hold on the fines rebates, as a test case is going to be passed in the High Court. There may be an extended appeals process to follow, but the result will be to set the law on the issue of appropriate bank overdraft charges and fines.
A similar area that banks have come under fire for is the incorrect charging of Payment Protection Insurance on credit cards or loans. Many customers were mis-sold the insurance to cover them in instances of unemployment or sickness, but the 'small print' revealed that many customers - for example those self-employed - were ineligible for the insurance all along and were wasting money on a pointless product!
Other bank charges have included fines for late payment on credit cards or loan arrears. Banks will sometimes add a £10 or so charge to customer's arrears accounts if their collections departments need to make outbound calls to these customers and collect the owed money. These fines can really add up, making the arrears issue even worse!
It will be interesting to see how these bank charges, penalties and fines systems will develop as the economic climate continues to worsen. For example, many banks are starting to charge monthly fees for their current accounts, to make up for losses from bank fines claims etc. However, customers are getting annoyed and may not put up with it for much longer, and they may increasingly begin voting with their feet!
Previously for example the banks used to charge very high penalty fees for unauthorised use of their overdrafts - around £25 to £30 per day that the customer was overdrawn. Usually these fines would be applied for three days if the account wasn't brought up to date, so the final charge could be nearly £100. Sometimes this could happen twice in a month as well and if a customer didn't check their account regularly, it was hard to keep an eye on whether they were in danger of going over their overdraft's agreed limit. These overdraft penalties were deemed by the bank to be acceptable due to the administrative cost that the bank incurred by processing these transactions, but as customer complaints to the Financial Services Authority (FSA) increased, they began an investigation into the legality of these penalties.
Since then it's been deemed - although as yet untested in the high court - that these penalties were in fact excessive and possibly illegal. The FSA deemed that an appropriate charges would be closer to £12 and thousands of Loans customers have since argued their case against the bank, reclaiming the bank overdraft charges and often claiming back the years of interest in addition. Currently most of these banks have put a hold on the fines rebates, as a test case is going to be passed in the High Court. There may be an extended appeals process to follow, but the result will be to set the law on the issue of appropriate bank overdraft charges and fines.
A similar area that banks have come under fire for is the incorrect charging of Payment Protection Insurance on credit cards or loans. Many customers were mis-sold the insurance to cover them in instances of unemployment or sickness, but the 'small print' revealed that many customers - for example those self-employed - were ineligible for the insurance all along and were wasting money on a pointless product!
Other bank charges have included fines for late payment on credit cards or loan arrears. Banks will sometimes add a £10 or so charge to customer's arrears accounts if their collections departments need to make outbound calls to these customers and collect the owed money. These fines can really add up, making the arrears issue even worse!
It will be interesting to see how these bank charges, penalties and fines systems will develop as the economic climate continues to worsen. For example, many banks are starting to charge monthly fees for their current accounts, to make up for losses from bank fines claims etc. However, customers are getting annoyed and may not put up with it for much longer, and they may increasingly begin voting with their feet!
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