Bank charges

[PuddleJumper]

A High Court test case is set to challenge whether or not bank charges for unauthorised overdrafts are unfair. If the court rules against the charges it could lead to billions of pounds being refunded to customers and banks losing millions of pounds every day in administration costs. This might eventually lead to reduce interest rates or even charges to have a current account.

BBC News

So, as a customer who has NEVER been overdrawn and whose cheques have NEVER bounced because of insufficient funds in my account, I could now end up earning less interest on my money if the courts should decide that banks cannot charge a fee for administering accounts that go overdrawn. I'm sure it's not going to come to that, but it annoys me that people think it's OK to spend money they haven't got and expect to be able to do so without any consequence.

What do you think?

[allycat228]

I wonder if the banks win this case they will increase the charges?

I went over my overdraft by £2.00 once and got charged about £60 even though they new my husband's wages were coming in that night

[Daniel]

Well Allycat. I'm sure there's something about the penalty not outweighing the amount you were overdrawn by. I could very well be wrong of course....

I agree with puddlejumper. The banks should reward people who do the right thing and don't go overdrawn. I've gone overdrawn a few times but never by much and I have to say that HSBC have been very reasonable with the charges. I think the most I ever paid was something like 70p. Too many people these days live in their overdrafts and buy expensive things with their overdraft rather than just waiting a month or if they can't, then taking out a loan at a lower interest rate.

I personally think people SHOULD pay through the nose when they go past a certain agreed overdraft limit.

[Mark]

Lloyds did that to my Dad. He had a large overdraft (Something like £2,000) and every month they would reduce his overdraft limit to exactly what he had in his account, so any withdrawls at all would result in a penalty.

There have been cases where people have been overdrawn by £1, though no fault of their own then been hit by over £100 of penalties, which they can't pay and they get hit by more and more.

[Mark]

Lloyds did that to my Dad. He had a large overdraft (Something like £2,000) and every month they would reduce his overdraft limit to exactly what he had in his account, so any withdrawls at all would result in a penalty.

There have been cases where people have been overdrawn by £1, though no fault of their own then been hit by over £100 of penalties, which they can't pay and they get hit by more and more.

[jim mcglinchey]

Bloody banks, while the rest of us working stiffs are struggling for a living does that cartel not make more than enough without their arbitrary penalties.

[Robinho]

this has been rumbling along behind the scenes for ages now, and the fact we've got to this stage is largely down to one man - Martin Lewis, of http://www.moneysavingexpert.com (great site, highly recommend it).

over the last few years, thousands of consumers have already claimed back thousands of pounds from banks simply by tallying the charges, querying them and threatening to take them to small claims court - the banks have largely paid out rather than risk going to court, losing and a precedent being set - if thats not an admission of being in the wrong i don't know what is!

the crux of it lies in the fact that the charges are disproportiante to the cost of administering the charge - in reality it is estimated by experts that it costs only a couple of pounds to administer an overdrawn account, if that much, so to charge a minimum of £30 to send you a letter, which they might do multiple times a month is in effect a penalty clause, which is ilegal in contract law.

charges will not be outlawed altogether if the OFT wins (remember this case is being brought by the office of fair trading, on behalf of consumers, against the banks), only that they will only be allowed to charge a fair amount to compensate themselves for the inconvenience of administering the unagreed overdraft.

just because you have been lucky enough to ave never gone overdrawn does not mean you never will, it wouldn't take much to change for many people to struggle for a couple of months and fall foul of the anks charges, which only makes it worse.

as for interest rates, there is absolutley no point in relying on the interest rate on a current account anyway, you would need many thousands of ponuds to see even a modest return, if you are interested (no pun intended) in seeing a return you should have your money in a savings or isa account at the very least, which will get a decent rate of interest.

these will always be an option as the banks want to get their hands on your money, so there is competition to offer a good deal, the same will apply for bank account charges, there will always be someone offering an account with no charge and as soon as people switch to it the other banks would soon change - rememer its your money so you can choose where to put it.

i'm all for the case, and i hope the OFT wins as i truly belive that the charges are an unfair clause, but the banks should be able to charge for unauthorised overdrafts.

[luke]

According to the BBC, they make £10m a day in bank charges. :

[Brown, Jon Brow]

I've got a radical idea-if you don't have the funds to buy something................................don't buy it!!!!

[rah]

On my previous account, when I did not have money in my account it would not give me any, pretty simple really. Then I would put it on the CC untli the next pay landed.
When I changed banks, the new bank gave me the money and then charged me $30 for the overdraft fee. This came as a shock at the end of the month when I saw $120 in fees. I rang up the bank, abused them and they gave it back to me. They said that they let the payments go through to avoid emabarresment at the counter, like I give a toss if someone thinks I don't have money!

Doesnt happen now that I now they do it, and my budget is a bit more precise now as well. But I still hate banks and I do everything I can to make sure they make as little money from me as possible.