Co-op under fire over bank charges

The Co-operative Bank, which described itself as ‘ethical’ has come under fire after announcing a change to the way that it charges on unauthorised overdrafts.

According to experts the new charging structure that will come into force next month will not only push people into debt more quickly, but will also affect lower income customers the most. The changes are to take effect next month, and campaigners state that lower income banking customers could really bear the brunt of the changes.

The UK’s financial regulator, the Financial Services Authority, stated earlier this year that banks could temporarily put the brakes on issuing bank charge refunds until the High Court test case had taken place in January 2008. However, experts state that the new Co-operative Bank charges appear to be in violation of the FSA guidelines. This was because banks were told at that time not to make any material changes or raise overdraft fees.

The fee from the Co-operative Bank will still be capped at £100 per month, but under the new structure many customers will clock up a higher fee more quickly, reaching the £100 limit faster than they would have done over the old structure. It is estimated that close to one million customers could fall victim to this new charging structure.

An official from the Consumer Action Group stated: ‘These clever changes will hit those people who are eking out a living day by day and go over their limit just before pay-day. This happens an awful lot for people on benefits and people like young single mums, who run out of money just at the end of the month. If you are in a vulnerable group this will happen every month of your life. These changes are likely to break the camel’s back for them. The Co-op is just throwing this at them because it knows they have no mobility in their accounts and can’t go anywhere else because of their credit rating. This is an insidious charge based on the knowledge that those affected just can’t walk away.’

Tom Smith
7th December 2007

OFT rejects banks’ main defence

The main defence put forward by UK banks just ahead of the bank charges super-case to be held in 2008 has been rejected by the Office of Fair Trading.

According to the banks the charges applied on customers’ accounts cover the cost of providing a service, and therefore are not covered by consumer regulations. However, OFT officials have stated that the charges applied to the accounts of those that exceed their overdraft limits do not constitute service charges in their eyes.

The issue over bank charges, which has been raging for the past couple of years, is to be heard at the High Court in a test case in January 2008. In addition to rejecting the defence put forward by the banks, the Office of Fair Trading has slated the terms and conditions used by banks in its submission to the High Court in preparation for the test case. The OFT has stated that the terms and conditions “do not provide the consumer with a fair opportunity to understand how they apply”.

OFT officials claim that some of the terms and conditions used by banks are misleading. John Fingleton, the Chief Executive of the Office of Fair Trading, said that he did not think that customers in the UK enjoyed free banking when he spoke on the BBC’s Money Programme. He stated: “At the moment consumers pay for banking through surprises and through stealth. They don’t see what they pay - very often they pay when an unexpected event happens like an unauthorised unexpected overdraft.”

An official from the British Banker’s Association stated that the fees and charges were clear and fair, stating: “The banks have actually made it clear that they see the unauthorised overdraft fees as a fee for a service.”

Alan Wright
24th November 2007

Bank charges could mean many consumers switch bank

A recent survey has been carried out by the consumer campaign group Which?, and the results reveal that there could be a rush of consumers flocking to switch banks in the event that standard monthly bank charges are brought in, effectively bringing free banking in the UK to an end.

A high court case scheduled for early next year will determine what sort of charges banks can impose on the accounts of those that exceed their overdraft limit, and for bounced cheques or returned direct debits. However, if things don’t go the way that bank want it is likely that many may introduce monthly account charges to recoup their financial losses.

According to the results of the survey around 80% of the 1022 people polled would look at switching to another bank if these monthly charges are introduced. Over 70% of those that were polled said that they thought it unfair that banks should bring in these charges, and many want the government to put regulations into place that will make sure that banks are not going to overcharge customers to swell their own profits.

According to a spokesman from Which?:  “Consumers don’t want to be charged for their current account and will vote with their feet if their bank introduces a monthly or annual fee. Our research shows that customers would support Government intervention to make sure banks don’t overcharge.”

An official from the British Banker’s Association also commented, stating: “UK banks offer the most cost effective and comprehensive package of current account services around and are keen to continue to do so. We have always said there is a place for the current model of free banking and part of the reason for seeking the clarity of a court decision on bank fees is to defend this.”

Tom Smith
20th November 2007

FSA to publish paper on greater transparency

The Financial Services Authority is to publish a paper on greater transparency next year, stating that the aim of the paper is to discuss the “purpose and possible effects of greater transparency”.

The paper is to be published early next year according to officials from the Financial Services Authority. This comes amidst calls from consumer groups for the FSA to name and shame financial companies that do not adhere to its rules.

The FSA has described itself as an “open and transparent regulator”. However, campaign groups state that the regulator must start naming and shaming those that breach its rules and regulations. The Financial Services Authority has come under fire for not naming the companies that fail on mystery shopping exercises or those that are found guilty of mis-leading advertising.

An official from campaign group Which? stated: “We think additional transparency is essential. Keeping things secret doesn’t help the consumer. We need more effective enforcement, the imposition of higher fines and greater use of naming and shaming. If the FSA can hit companies’ reputations as well as their bottom line, it offers a strong incentive to comply with regulation”.

The National Consumer Council agreed, with one official stating: “As a matter of principle, consumers have a right to know whether or not firms comply with the rules and treat customers fairly. Regulators hold much information that would equip people to make better decisions. We hope the FSA’s discussions lead to speedy action - information is a powerful tool in consumers’ hands.”

The Information Commissioner’s Office recently ordered the FSA to name twelve companies that were accused of selling endowment mortgages with inappropriate charges. The FSA is appealing against the Freedom of Information rulings made by the ICO.

Tom Smith
19th November 2007

London property purchasers being hit hard by stamp duty

A recent report has highlighted just how hard property purchasers in the London area are being hit when it comes to stamp duty.

The extortionate cost of buying a property in London means that buyers have to also pay more for their stamp duty, as well as for their deposit, and it is estimated that the average upfront fee required by first time buyers in the city comes to over £20,000. This covers just the deposit and the stamp duty, and does not include additional fees such as legal costs and removal fees.

Figures indicate that London stamp duty costs have rise by over 800% in the space of just ten years, which equates to an 80% rise per year in the cost of stamp duty. With the average apartment price in London standing at around £263,000 the 3% stamp duty comes in at a shocking £8000. Coupled with the 5% deposit of just over £13,000, this brings the cost of just the deposit and stamp duty on an apartment with an average value to around £21,000.

The survey was carried out by Zoomf.com and shows the difference between the average apartment price and stamp duty costs in 1997 compared to today. In 1997, a decade ago, the average value of a flat in London was around £87,000, which meant that the stamp duty cost would have been under £900. In just ten years potential property purchasers for the London area – as well as other areas – have had to deal with rising property prices, rising stamp duty costs, increased interest rates, and increased additional costs such as legal fees.

Zoomf.com reported that it has tens of thousands of properties listed for the central London area, but only several of them fell under the £125,000 value, which is the threshold for stamp duty.

Tom Smith
20th October 2007

Lloyds reductions in charges may not be all that great

Consumers and campaigners were pleased when Lloyds TSB, one of the UK’s major high street banks, recently announced that it was cutting its charges for unauthorized overdraft use, bounced cheques, and returned direct debits.

However, the victor has quickly turned to concern, with campaigners pointing out that under the new charging structure many bank customers could actually find themselves even worse off than they are now.

Lloyds TSB announced that it would be cutting the charges for bounced cheques from £25 to £20. It also announced changes to charges for unauthorized overdraft use. Previously going over the overdraft limit meant a customer would be charged £30 with a maximum of three charges per month. However, this has now been changed to a monthly fee of £15 and then between £6 and £20 per day for a maximum of ten days.

Officials state that this could mean that someone that exceeds their overdraft limit by £100 could clock up £200 in charges. An official from Which? stated: ‘These charges appear excessive. If you go over by £100 in the course of a month you could end up with total fees of up to £200.’ Other major banks have also made changed to their charges following in the footsteps of Lloyds, but is seems that these charge reductions may not be as beneficial as they initially appear.

The Office of Fair Trading has recently announced that if banks do reduce their charges to the satisfaction of the OFT then the test case scheduled for next year may be cancelled. However, this will only happen if the reductions made by the banks are in the consumers’ best interests.

Tom Smith
20th October 2007

Bank charge test case may be dropped

According to a recent report the Office of Fair Trading is considering dropping the test case over bank charges, which was planned for next year.

The test case was designed to make a final determination over bank charges following months of controversy and rows between banks and consumers. The battle started after campaigners and regulators branded the charges, applied for exceeding overdraft limits, bounding cheques, and returned direct debits, unlawful and unfair.

Officials from the Office of Fair Trading have confirmed that there is a chance that the test case will be dropped, but this will only happen if it is in the best interests of the consumer.

Officials stated that they may consider dropping the test case if banks decide to cut their charges to a level that makes them fair to consumers. Lloyds TSB has already cut its charges, but many experts state that it has not cut them enough.

One OFT official stated: “If we do our own financial analysis, and they come in with a number that is lower than our analysis would suggest is an unfair charge, there is no need for the court case to go forward. We will be looking out for what is the best outcome for the consumer.”

However, the banks are arguing that their bank charges have nothing to do with the OFT, and that officials have no power over their bank charges. The OFT is due to review charges to come up with a figure that it believes is fair.

If the test case does go ahead, many experts think that free banking could come to an end in the UK and that banks will start charging monthly fees for having a current account to recoup losses from bank charges.

Tom Smith
16th October 2007

Bank to waive mortgage fees until end of September

One of the UK’s leading high street banks, HSBC, has announced earlier this month that it plans to waiver all mortgage fees for new and existing customers until the end of September.

The bank has already agreed that it will be axing mortgage exit fees, as have many other lenders, following a call for action from UK regulators and campaigners who stated that mortgage exit fees has rocketed for no apparent reason over the past few years.

According to reports the mortgages offered by HSBC will be totally fee free for existing and new customers until the end of September. However, the bank is offering its best rates as mortgage specials, and for these customers will still need to pay arrangement fees. According to some officials, the bank has set rates higher than many of its competitors, and this, along with the arrangement fee charged on the best deals, could mean that customers could still be better off going elsewhere despite the fee free offer.

One official from HSBC stated: ‘With some lenders recently bowing to pressure to scrap their exit fees, HSBC has decided to stay one step ahead by removing all fees on its standard mortgage range until the end of September. This will enhance HSBC’s reputation for providing transparently priced mortgages which offer real long-term value. Sadly some lenders will simply look to rename their exit charge or bump up fees elsewhere, however HSBC customers can rest assured, the rate they see is all they will pay.’

The bank does offer a range of mortgages, but consumers are urged to do some research and compare rates from other lenders, as even if they have to pay a fee with another lender it could still work out cheaper due to the lower rates of interest offered.

Tom Smith
28th September 2007

Mortgage Fees Go Through The Roof

Homebuyers are being neatly trapped into taking out what are on the face of it good value deals only to be knocked with sky-high fees. These have soared so much that some lenders have hiked arrangement fees by over 600% in the last two years.

By seeming to have low interest rates mortgage lenders can push themselves further up best-buy tables, but in fact they are making money by charging ever-higher arrangement fees.

Intelligent Finance, a subsidiary of biggest mortgage lender Halifax, now charges an arrangement fee of £2,999 in some cases – up by an incredible 601% on its maximum charge two years ago. The actual cost of arranging a mortgage can’t have gone up by £2,500 in the last two years! In fact, costs are likely to have gone down thanks to computerisation. The huge increase finds its way straight into the provider’s coffers.

Finance experts say that the practice tricks borrowers, in a period when interest rates have hit their highest level since March 2001. Lenders use the headline interest rate to attract customers, and then use arrangement fees to make their money.

Scottish Widows, part of Lloyds TSB, now has a maximum fee of £1,999, up from £295 two years ago and Abbey, Nationwide, Northern Rock and Woolwich, part of Barclays, have all increased their fees dramatically too.

Some lenders charge an arrangement fee as a percentage of the loan, so someone borrowing £300,000 would have to pay an arrangement fee three times higher than someone taking out a £100,000 loan. This is scarcely justifiable as the work involved is just the same.

Homebuyers are advised not be lured by the appealing low headline rates, but to verify all fees and include them in calculations to get the true cost of a loan. For first-time buyers houses are more unaffordable than the last housing market crash 16 years ago, and. Stamp duty is capturing more people than ever before, and it is obvious why so many people are having financial problems with the increasing cost of moving, or simply owning a home.

In May 60% of first-time buyers had to pay stamp duty, as the average price of a home reached £155,000, and the zero stamp duty threshold is well below that at £125,000. An average first-time buyer now has to spend four years eleven months saving for stamp duty, legal fees and a 5% deposit to come up with the £9,844 needed. In 2005 the time needed was eleven months less.

An interesting statistic in the current environment is that the number of mortgage approvals has risen again, according to the Bank of England’s data, with 114,000 loans approved in May compared with 109,000 in April. That will only make a further rise in interest rates highly likely.

On the other hand, house price growth did cool in May. The average home in the UK cost £211,056 in the year to the end of May, up 10.9%. This is down from a rate of increase of 11.3% for the same period to April.

Tom Smith
25th Septmeber 2007

Lloyds TSB’s shameful behaviour over bank charge refunds

Lloyds TSB is the only bank so far that has managed to win two cases with regards to the refunding of bank charges – a row that has been going on for many months between consumers and banks.

In most cases banks have paid up, albeit reluctantly, after consumers made a claim for the return of unlawful and unfair banks charges for exceeding their overdraft limits and also for returned cheques and direct debits. However, in two cases the judge ruled in favour of Lloyds TSB in these cases.

However, Lloyds TSB has also been using its own tactics to try and get out of making payment according to a recent report, which has highlighted some of the tricks that the bank has been using in order to avoid having to return customers’ bank charges. The banking giant has issued staff with guidelines on how to deal with claims, after being accused of netting £300 million a year from overcharging customers. The training pack consists of sixteen pages of guidelines, which have been described as dirty tricks by some experts.

Amongst the guidelines issues to staff at Lloyds TSB are to reject first time claims even in cases where the consumer is in the right, not to offer a payout of more than £750 in any claim, and only to offer an immediate settlement to critically ill or dying customers. A special team has had to be set up by the banking giant in order to deal with the flood of claims it has received since the row over bank charges erupted last year.

One staff member dealing with complaints brought the training pack to the attention of a national newspaper, stating: ‘Cynical does not even begin to describe it. I was placed by a recruitment agency, working from 5pm until 1am for about £200 a day to work in this nondescript building on the outskirts of Andover. I was one of about 50 people just dealing with complaints about service charges - we were told the bank was receiving more than 500 a day. This training pack was given to me on my first morning and I was told I had to adhere to it as this was the company policy - no deviating. The booklet was telling us to reject customers asking for refunds, then to palm the more persistent ones off with nuisance money.’

Tom Smith
14th September 2007

Beware the bullying banks

The row over bank charges has been dominating the financial news in the UK over recent months, with thousands of customers attempting to reclaims charges for exceeding the overdraft limit on their bank accounts after UK regulators deemed the fees as unfair and unlawful.

However, although many people have managed to reclaim their money back, going back up to six years, it has not been a smooth or easy process for many, and banks have been using a range of underhand tactics to try and discourage consumers from reclaiming these fees.

A recent study that was conducted by This is Money has shown the extent of the bullying tactics that banks have used to try and stop people from reclaiming their bank charges. According to the study banks have breaching industry guidelines on a frequent basis by threatening thousands of customers with account closure in the event that they make a claim for their charges. Many vulnerable customers are being targeted by some of the leading banks, and these tactics are pushing many into avoiding claiming their charges for fear of losing banking facilities.

The report showed that over one in eight customers that have tried to reclaim their bank charged have been threatened with closure of their accounts, which is in direct breach of industry guidelines in accordance with the Banking Code. A spokesman from the Banking Code Standards Board stated: ‘Banks are allowed to close down accounts for commercial reasons. But they must also treat fairly any customers who are experiencing financial difficulties.’

Experts state that consumers should not let themselves be bullied in this way, and that any threats such as this should be directed to the Financial Ombudsman Service.

Tom Smith
13th September 2007

Bank may have equipment seized

A branch of the Abbey bank in Chorley, Manchester, has been threatened by bailiffs following its failure to adhere to a court order and repay past overdraft charges to a customer that took it to court.

Sam Umaar sued the Abbey over the repayment of illegal bank charges amounting to nearly £3000. However, despite a court order instructing the bank to make payment to the customer no action was taken.

Sam Umaar sued the Abbey over bank charges that amounted to £2493. These were charges that the bank had applied to his account for exceeding his overdraft limit – charges that have now been described as unlawful and unfair by financial regulators in the UK. Mr Umaar’s case went to court in June, and because the Abbey did not show up to defend itself the judge granted an additional £276 to Mr Umaar, bringing the total judgement to £2769.

However, despite the court order the Abbey still did not pay up, and now bailiffs have visited the branch and given officials seven days to pay up. If this is not done the bailiffs state that they will seize equipment to the value of the sum owed. This has been done in the past with other banks, where equipment such as computers, faxes, printers, and other office and banking equipment has been taken in order to make the bank pay up in accordance with the court order.

Mr Umaar stated: “It’s ludicrous that the Abbey haven’t paid up when they know they have to.”

He added: “The bailiff says I will get my money - it is just a matter of when.” Officials from the Abbey have stated that the cheque has now been issued to Mr Umaar, and that bailiffs have been notified of this.

Tom Smith
11th July 2007

Charge Claimants Can Ask For Strike Outs

The campaign for people to reclaim excessive charges from banks has been hit by banks “playing the game” and stringing customers’ claims along until they are taken to court. More often than not, the banks then don’t turn up to court. Read more

Banks may be acting illegally over bank charges

Over recent months there has been a battle raging between banks, campaigners, and consumers, with the banks standing firmly on one side, and consumers and campaigners fighting in unity on the other side with regards to unfair bank charges.

Campaigners have been urging consumes to fight back against the banks and reclaim bank charges that were deemed unlawful and unfair by UK financial regulators last year, and many consumers have already done this, with some receiving thousands in backdated charges that go back up to six years.

However, although the banks have been paying up, albeit with some pressure in some cases, this is something they have been doing reluctantly. And in the latest move to try and put consumers off from making claims for the refund of charges, banks have been sending out threatening letters.

According to recent reports some banks have been contacting customers that have already been awarded refunds on their banks charges, and have been informing them that if they try to claim again in the future their bank accounts may be closed. However, officials claim that this is a move that could be classed as illegal.

The Royal Bank of Scotland has sent out letters of this nature, and the letter reads: ‘Any charges that properly accrue in the future will be applied to your account in line with our published tariff and in accordance with your agreement with the bank. Should you be unwilling to accept any such charges, then we may need to consider if we are prepared to continue to provide you with your existing banking facilities. Instead, we may offer you a simple account that does not offer borrowing facilities or other services that can result in charges.’

A spokesman for RBS stated: ‘If a customer is unwilling or unable to pay the charges for the services we provide or is considered a particular credit risk, then it is wholly appropriate for us to consider whether their existing account is best suited to their needs. As a responsible lender it may be appropriate to provide them with a more suitable account.’

Tom Smith
1st July 2007

Bank charge court claims need to be watertight

Experts have warned that consumers that are trying to reclaim bank charges from their banks through the courts need to make sure that the case they are putting forward is solid and watertight in order to increase their chances of successfully reclaiming back the cash from the bank.

Apparently a number of claimants are failing to provide the right documentation or are failing to put forward their case properly, and this can increase the chances of the judge ruling in the bank’s favour.

Judges are becoming impatient with these cases, as there are many pending and blocking up the court system, and banks fail to turn up to defend themselves, which means that the claimant wins the case by default.

Experts claim that judges are now looking to get rid of what they describe as frivolous claims, and this could affect those that do not put forward a strong enough case or provide the necessary paperwork and documentation to support their claim.

Lloyds TSB has already won two cases, where the judges ruled in the bank’s favour rather than that of the claimant. A judge in Hull has also stated that he may strike out twenty claims against banks. Experts think that all of these lost of struck out cases could be the result of sloppily put together cases and inappropriate or inadequate documentation from the claimant.

Thousands of consumers have been claiming back charges from their banks going back up to six years, and these charges were applied for exceeding the overdraft limit on the account, as well as for returned direct debits and cheques. However, where banks have reduced to repay the full amount many have decided to file a small claim against the bank through the courts.

Tom Smith
30th June 2007

Overdraft interest rates go up

Recent reports have indicated that some banks and lenders have raised their overdraft interest rates by huge amounts over the past year, by far exceeding the interest rate rises that have been imposed by the Bank of England in terms of the base rate.

In some cases there has been an interest rate rise of three percent on overdraft borrowing over the past twelve months, whereas the total base rate rise has been one percent. Some of the costliest overdraft charges stand at around twenty percent, which is almost four times the Bank of England’s base rate.

Experts think that this is yet another move by banks to try and generate more profit from customers following the huge financial losses that have resulted from moves such as capped credit card penalty fees and reclaimed bank charges. Many consumers are unaware of the raised overdraft interest rates because the majority of consumers with overdrafts do not take note of the fluctuation of rates on their overdraft, and banks certainly do not make a big song and dance about it.

An investigation showed that the leading banks in the UK are all charging hefty interest rates on overdrafts, which means that they are netting huge profits from those that use their overdraft facilities on a regular basis. For instance, both Lloyds TSB and HSBC have raised their overdraft interest rate charges by over three percent since last August, which is over three times the interest rate rise on the base rate.

One financial analyst stated: ‘A few providers have taken full advantage of the opportunity to increase their rates, but instead of passing on the extra costs of the base rate rise, many have exploited the situation.’

Tom Smith
17th June 2007

Consumers outraged by judge’s bank charge decision

A number of consumers in the UK are outraged at the decision of a judge in Hull who plans to dismiss their court cases against a number of banks.

Around twenty customers who have taken their banks to court over reclaiming bank charges have been told that the cases are likely to be dismissed as a result of the recent case won by Lloyds TSB. Lloyds was the first bank to win a case, when the Birmingham judge ruled in the banks favour rather than in favour of the plaintiff, Kevin Berwick, who was seeking over £2500.

Despite officials from the Financial Ombudsman Service stating that the Lloyds TSB case is not a definitive one, the judge from Hull, Ian Besford, has cited this case in his decision to dismiss the cases against Lloyds TSB, Barclays, and HSBC. The cases are due to be heard on July 4th. A number of the consumers concerned have contacted the BBC with regards to the issue.

A spokesperson from Consumer Action Group stated: ‘Kevin Berwick lost in his case in Birmingham because he didn’t supply enough evidence. This judge in Hull seems to be striking out the claims before he has even seen the detailed evidence of each claimant.’

However, the judge has stated that he plans to dismiss the cases because there appears to be ‘no reasonable prospect of success in the light of the recent decision’ regarding the Lloyds TSB case.

This is the first judge to have referred to the Birmingham Lloyds TSB case in his decision. A court official from Hull stated: ‘It is entirely up to each judge to decide for himself if the Birmingham judgement is an interpretation of the law he agrees with.’

Tom Smith
12th June 2007

Consider financial ombudsman over bank charges

In the ongoing disputes relating to bank charges Lloyds TSB recently became the first bank to win a court case against a customer that was trying to reclaim bank charges that had been imposed for exceeding the overdraft limit on the account, and for returned cheques and direct debits.

And is seems that this unprecedented case has started to put some consumers off from trying to reclaim charges from their banks. However, experts advise that there is another route available.

This is Money has advised consumers that if they don’t feel confident about taking their bank to court of reclaiming bank charged they can simply go through the Financial Ombudsman Service. This is a free service, so consumers will have nothing to lose by taking their complaints to the ombudsman. And if, at the end of the day, the consumer does not agree with the financial ombudsman’s decision he or she can still take the case to court.

This is Money also warns that this cannot be done the other way around. So if a consumer takes the bank to court, and the judge rules in favour of the bank, the consumer cannot then take the complaint to the financial ombudsman because the judge’s ruling has to be the final one. So, anyone having trouble getting bank charges back from their bank should consider complaining to the FOS before taking the case to court.

Even banks are now using the Lloyds RSB case to try and make consumers feel as though this is a definitive decision, but this is not the case.

One FOS spokesman stated: ‘We are seeing letters from banks suggesting the Birmingham case is definitive. This is usually happening at local branch level. Often when we raise it at a senior level, head office agrees that the letters are wrong and stop any more going out.’

Tom Smith
10th June 2007

Bank charge victory for Lloyds TSB

One of the UK’s banks has made history by being the first to have its banks charges upheld in the fight against unfair and unlawful bank charges.

Many consumers across the UK have been claiming back bank charge fees from their banks, which were applied for exceeding the overdraft limit and also for returned direct debits and cheques. The fees go back as far as six years, and some banks had been charging nearly forty pounds per fee.

Last year regulators and campaigners in the UK deemed that these fees were unfair and unlawful, as each fee was up to ten times the actual cost incurred by the bank in terms of administrative costs. As a result of this many people tried to claim back these fees going back six years, and although banks were reluctant to pay out none of them defended the charges in court, which resulted in millions of pounds being paid back to claimants. Financial regulators in the UK are still trying to reach a decision with regards to what can be deemed a fair fee for banks to charge.

However, earlier this week Lloyds TSB was taken to court over the return of £2545 worth of bank charges by a Mr Kevin Berwick – and the courts ruled in the bank’s favour. This could have repercussions for all those that are planning to make a claim or that have pending claims.

In his ruling the judge stated: “Having held that the charges complained of are not charges for breach of contract but part of the price of the services provided by the bank… he has not satisfied me that he has any ground in law for recovering from the bank the amount of any charges which he has paid to it.”

A Lloyds TSB spokesperson stated: “It appears to acknowledge our position in respect of current account service charges. The court has agreed with us that these are charges for a service and not default or penalty fees as has been argued by others,” 

Tom Smith
31st May 2007

Banks warned by judge over unreasonable behaviour

A judge in the UK has issued a warning to banks in relation to unreasonable behaviour in cases where consumers try to claim back charges that have been deemed unlawful and unfair.

Many consumers in the UK have made claims for bank charges going back up to six years, and although in all cases but one the claims have been successful a number of banks have been acting in a manner deemed unreasonable, using retaliatory measured such as account closures to get back at the consumer.

And another tactic being used by some banks is the pretence that they will be defending claims in court, when in actual fact they have no intention of doing this at all.

It is this tactic that is being objected to by the High Court judge, David Mackie, who claims that the banks are wasting court time and resources with this pretence. He further stated that he was looking into awarding damages against the banks if they continued to do this in instances where a consumer has filed a claim in court.

The London Mercantile Court has had hundreds of these bank charge cases referred through lower courts this year, and the hope is that at some point one of the cases will be heard, producing a test decision.

Judge Mackie stated: “If the banks had won, many fewer customers would have sued. If the banks had lost, the claims would have been much easier to sort out than they are now.”

With banks deciding to settle the claim at the last minute before a case is heard, the likelihood of a test decision is a slim one.

Judge Mackie added: “On the face of things each case raises serious issues which the court would permit to proceed to trial. But this is fantasy because, at least for the moment, we all know that there will be no trial.”

Tom Smith
30th May 2007

Bank charge firms to be investigated

On the back of current investigations that are being carried out into the charges applied to customers’ accounts by banks in the UK by regulatory bodies, a further investigation will now be carried out into the various firms that have sprung up claiming to be able to help consumers to recover these charges – for a fee.

Regulators will now be looking into and scrutinizing these firms amidst fears that many consumers may be wasting their money on paying unnecessary fees for a task that they can carry out themselves free of charge, other than paying for copy statements.

UK regulators have been looking into unfair and unlawful charges that have been charged to customers’ accounts by banks for some months, and as a result of this many consumers have managed to claim back charges and fees going back up to six years, which in some cases has amounted to thousands. However, in light of the increasing number of people attempting to claim back fees from their banks a number of companies have sprung up with offers of assistance in exchange for fees.

These companies will now be investigated by the Ministry of Justice, and amongst the practices that will be looked into by the ministry is cold calling, where company representatives phone up consumers to try and talk them into letting them help claim back charges. However, consumers can just as easily do this themselves for the cost of a duplicate statement, and without having to pay any further charges.

In a recent case Lloyds Bank won a case where a man had tried to make a claim for his charges, and this was the first case to be won by a bank in relation to these charges. In other cases banks have failed to justify the charges, and consumers have been able to reclaim them. 

Tom Smith
24th May 2007

UK banks investigations widen

Regularity bodies in the UK are set to widen their studies into banking and bank charges after months of investigations into bank charges have already been carried out.

The Office of Fair Trading and other financial regulators in the UK have been looking into the fairness of extortionate charges for exceeding an overdraft, having a returned cheque, or having a returned direct debit. Banks have been charging up to forty pounds or more in some cases in these situations.

The bank charges have been branded unlawful and unfair by regulators, and as a result many consumers have been able to reclaim their charges going back up to six years, and sometimes amounting to thousands of pounds. The OFT is likely to make a decision later this year on what is deemed a fair charge for administration that costs the bank between £2 and £5. In the meantime, consumers continue to try and reclaim their past charges.

Now that the study and review has been extended it is being described as one of the largest investigations into banking ever carried out. As part of the extended investigation regulators will be looking into the costs of banking, how the end of free banking might affect consumers and the economy, and will also continue to assess the fairness of bank charges. It is thought that placing a low ceiling limit on these charges could result in many banks charging all customers a monthly fee for holding a current account.

With regards to extending the investigation one OFT official stated: “This will provide the necessary context for assessing the fairness of unauthorised overdraft and returned item charge before we apply the law in this area.” 

A National Consumer Council official also commented on the situation, stating: “Banks must deliver a fair deal for consumers and stop dragging their customer service reputation further into the mud by waiting for regulatory action.”

Tom Smith
15th May 2007

Are You Paying For Your Cash Back Credit Card?

The offer seems to be too good to be true.  Spend money on your credit card and your provider will give you cash back on the card as part of your credit card loyalty program.  The more you spend, the more cash back you become entitled to. This all sounds well and good, but if you’re not careful you may very well find out that it is you who are paying for the cash back bonus you’re getting, not your UK credit card provider.

In order for your cash back reward program to work in your favor you need to be a disciplined credit card user.  This does not mean that you should not use your credit card, or only use it in certain circumstances.  In fact, you really should be using the card as often and as much as you can if you want to take the full benefit of the loyalty program.  What it does mean, however, is that you need to make sure that you clear your credit card balance at the end of each credit card statement billing date.  If you fail to clear your credit card balance on the statement due date, and you carry-over your credit card balance to the next month, then you start to become the person paying for your cash back rewards, not your credit card provider.

The reason why it is so important that you do not carry over a credit card balance to the next payment statement date is because you need to avoid incurring any interest or fees if you want to benefit from the cash back loyalty program.  As soon as you lose this, any benefit you would have got from your cash back credit card loyalty program will be cancelled out by the interest and fees you need to pay for carrying over a balance on the card.  Indeed, you may well find that the interest and fees you pay each month for carrying over the balance on your credit card will exceed any cash back you would be entitled to.  Unfortunately, this aspect of cash back credit cards is something that UK credit card providers are relying on in order to fund the cash back they’re offering you in the first place.

Consequently, if you are the type of UK credit card user who pays off their credit card statement balance at the end of each billing cycle, then having a cash back credit card loyalty program can prove to be very lucrative for you.  However, if like 60% or so of the other users of UK credit cards you are a borrower on your credit card, then it is very likely that you should look for some form of alternative loyalty program or, more importantly, a credit card that offers you a lower monthly interest rate than your current card provider offers, as, in the long run, this is very likely going to save you more money.

If you are in any doubt as to whether or not a UK cash back credit card is for you, be honest with yourself and ask yourself whether or not you have the discipline to pay off your credit card statement each month.  If the answer to this question is yes, then this card is working for you.  If the answer is no, you are paying for your credit card cash back loyalty program offer – and then some.

Richard Smith
13th May 2007

More Information:

• Cash Back or Rewards – What’s Your Preference?
• Available Types Of Credit Cards
• Credit Card Charges

External Links:

• More cash back credit card offers from CardGuide.co.uk
• Cash Back or Rewards - You Choose
  Not sure which would be the best for your spending levels? This article discusses the advantages and limitations of bothtype of credit card offers

Over two billion still to be claimed in bank charges

According to figures released by the price comparison website Uswitch, over two billion pounds worth of bank charges are yet to be claimed by consumers that have been hit with hefty and unlawful penalty fees over the past six years.

The topic of bank charges has exploded over recent months, with regulators claiming that the charges imposed for exceeding an overdraft limit and for returned cheques and direct debits are unlawful and unfair. As a result many people have claimed back these charges going back up to six years, but Uswitch officials claim that around £2.12 billion has still yet to be claimed.

The figures from Uswitch suggest that around four billion pounds in charges have been netted by banks that have applied these charges to the accounts of around nineteen million consumers in the UK. So far, over half of that amount has not been reclaimed by consumers.

So many people are now being encouraged to reclaim their fees from banks that there are a number of financial services available that can help consumers to try and reclaim their fees if they are unsure as to what they need to do. However, the clock is ticking, as an impending decision from UK regulators with regards to what is construed as a fair fee may reduce the amount that claimants can file for.

Many consumers have already threatened to take their banks to court for not repaying the fees, and in most cases the banks have paid up on a last minute basis, with no banks actually having gone to court to justify the amount that they charge.

However, it seems that many consumers are frightened of the consequences of making a claim, with a number of banks having threatened to close consumers’ accounts if they try and reclaim their fees.

Tom Smith
10th May 2007

Bank claims that most consumers won’t be affected by new charges

Following its recent announcement to start charging UK customer a ten pounds monthly fee if they did not meet certain criteria, the First Direct Internet bank, a subsidiary of the HSBC Bank, has been defending its decision. The bank has been receiving calls from many angry customers who want to know why they are going to be charged a fee for using the bank’s services. The bank currently has around 1.3 million consumers, but some experts have warned that First Direct may lose a lot of its custom as a result of the new fee.

The new charge introduced by First Direct is due to come into force in February of 2007, and current account holders that do not pay in or maintain a balance of at least one and a half thousand pounds in their current account each month could find themselves being charged. Exceptions to the new charge are those customers that also have other financial products with First Direct, such as a mortgage, credit card, savings account, or loan.

One spokesperson from First Direct stated that he did not think that the bank would lose custom as a result of the new charges, and stated that most consumers that banked with First Direct would not even be affected by the new charges. He stated: “Around 85 per cent of our customers will still pay nothing after these charges are introduced. The only people affected will be those with just a current account, if they do not keep a balance of £1,500 or more. “

He also added: It’s possible that not a single one of our customers will pay the charges. We’ve got a great number of customers who’ve got accounts with us they don’t particularly use. We’re just asking those customers to bring more banking to First Direct to make us their first choice.”

HSBC Becomes First UK Bank To End ‘Free’ Banking

20 years after HSBC and Barclays introduced the concept of free banking to the UK, HSBC have announced that it is now time to pull the plug on this popular product and re-introduce a charge for using its banking services.

At present, HSBC has announced that it will limit charging the fee to its online banking arm, First Direct.  Moreover, the fee charge of £10 per month will not be applied to all customers of First Direct.  The “lucky” First Direct customers who will find themselves subject to the £10 monthly fee will be those who fail to make deposits of at least £1,500 per month or those who do not maintain an average balance of £1,500 on their current accounts.

While it is true to say that the UK has remained one of a very few select countries to maintain free current account banking for those bank customers who do not go overdrawn, over time this has probably been one of the most popular products that major UK banks have offered.  Nevertheless, it seems, in this case, that the success of free current account banking in the UK has also been its eventual down-fall, with many leading UK banks having made grumbling noises over the past year or so that the because the UK has free current account banking, this no longer makes the banks competitive with their European and American competition, the majority of whom already charge for current account services.

To many of the 1.3 million customers of First Direct, however, this is going to be a bitter pill to swallow.  UK banks made record profits in 2005, so to now be told that the bank is no longer competitive with its overseas rivals merely because it has not been arbitrarily applying a monthly fee  £10 on certain financially disadvantaged customers may just sound a little like sour grapes.

Thankfully, other leading UK banks, such as Royal Bank of Scotland, Barclays, HBOS and Lloyds TSB, have decided not to follow the lead of HSBC at this time.  However, with most UK bank’s looking to recoup the estimated £1 billion in lost revenue following the Office of Fair Trading’s forced cut to penalties applied on late credit card payments, it would need optimism of the highest order to believe they won’t follow suit soon, a view clearly echoed by a spokeswomen for Royal Bank of Scotland, owners of Nat West, who, when asked RBS’s stance on the issue, was quoted as saying that: “There are no current plans, but you can never completely rule options out in the long term”.

In the meantime, the estimated 200,000 customers of First Direct who are likely to be directly affected by this latest move now have until February 2007, when the new charges will come into effect, to either get their accounts in order so that they do not fall foul of the new charges or to look for alternative free banking arrangements. 

Kindly, however, First Direct have given the 200,000 or so estimated customers it says will likely be effected by this move a ‘get out of jail’ free card: the bank will agree to waive the fee if the customer agrees to take out another First Direct product – such as a loan or insurance.