I’m surely not alone in actually celebrating the news at the end of last week that for the moment, attempts to legally challenge the right of banks to levy charges on unauthorised overdrafts had ended in failure.
Of all the grassroots campaigns aimed at sticking it to the man and fighting for the rights of the poor oppressed masses staged in recent years, this always struck me as one of the more self-serving, badly thought out and potentially disastrous in living memory. I’m not the biggest fan in the world of high street banks and the way they treat their customers, as I have ranted several times in the past – but let us all be honest here, the courts got it absolutely right. There is no reason at all why your bank should not hit you with a penalty for going over your limit. At the end of the day this is a spontaneous gesture, one which can potentially save you the embarrassment of having a transaction declined, but at the same time one which carries with it a huge risk for the bank in question. Without any checks, without any investigation into the circumstances and without any real reason to believe this is money they will ever see again, the bank is willing to lend you a token sum of money on spec and trust to the Gods that there is a good reason for you needing to borrow it.
In short, although it is a service the banks are cheerfully offering, they need to have some way of discouraging excessive use of that service – and what better way than to impose what are at times punitive charges for doing so. Yes, at the end of the day there is an element of profiteering there and I’m sure their balance sheets have benefited enormously from the charges imposed on customers going over their limit, but at the end of the day all they are doing is trying to persuade customers that managing their finances better is a far cheaper way of living and at the same time limiting the risk they expose themselves to by offering an unauthorised overdraft facility in the first place. Funny that – a year ago banks not limiting their risks was being blamed for an economic meltdown.
The best bit was that this campaign against bank charges was spread far and wide like some kind of evangelical crusade. I’ve lost count of how many forums I would read with a sticky thread noting the ways you could try to claim back from your bank along with a link to download the form letters that were supposed to put the fear of God into your bank manager. There was even a record made – ‘I Fought The Lloyds’ by Oystar which was released in January 2008 and was supposed to fly to Number One to demonstrate just how widespread public revulsion at these charges was. It was bloody awful and deservedly limped to Number 25 (during the lowest sales period of the year you will note) before sinking without trace.
The daft thing was this was all so short sighted. People were so wrapped up in the gleeful prospect that they might suddenly get free cheques for hundreds of pounds back from their banks and that all these profiteering fat cats might suddenly be forced to fork out millions of pounds that they failed to consider what the consequences of this huge hole in the balance sheets might be. It wasn’t idle scaremongering that led financial commentators to speculate on the imminent end of free banking – charges for cash withdrawals, commission fees for card payments, and monthly account charges whether you had a “premium” account or not – they were all very real possibilities as the banks attempted to claw back the money they were about to lose.
So it is in fact to be cheered that common sense has prevailed. At the end of the day your bank account and the terms that come attached to it are a commercial arrangement between you and the financial institution in question. In a free market economy there is no earthly reason why a bank should not attach certain penalties to violations of parts of the agreement, particularly when it is out of their own goodwill and at their own risk that they allow you to exceed certain limits or stray outside certain set boundaries. I say this as someone who at the start of the decade frequently found himself bumping against his overdraft limit and whose old bank statements almost certainly contain evidence of several hundreds of pounds of charges which he incurred. I was never once motivated to try to claim this back on spurious grounds. I knew the rules when I signed up. More fool me for breaking them.
Believe it or not there are plenty of battles against banks and other assorted financial services companies that are far more worth fighting and which do have some merit to them. Take the credit card companies for example. At a time when interest rates on savings have plunged to the floor and the Bank Of England base rate remains stubbornly at a record low level, how do credit card issuers continue to justify annual interest rates of close to 17% for their products. OK, it is a premium service and once more represents a carefully calculated risk on the part of the lenders, but for the rates they charge to be the same, or in many cases even higher than they were 10-12 years ago when interest rates were around the 6% mark is as blatant a consumer rip off as you can get. For my own entertainment I regularly use the “contact us” link on my online ISA account to complain about the halving in the space of a year of the rate of interest they pay me on my investments and asking how they sleep at night advertising both a tokenistic rate of interest on savings balances and a punitive extortionate rate of interest on credit card lending on the front page of the same website. Sadly these messages elicit little more in reply than a patronising “you clearly have no understanding of the way financial affairs work, so please go away and be grateful little person” but I carry on sending them anyway. How else are they supposed to know how unhappy their customers are if we don’t tell them after all?
Even when you bite the bullet and have a credit card at an extortionate rate, you still get screwed by every con trick in the book. I know it is my own fault for having an MBNA card, and their widespread reputation for being a bunch of chiselling crooks is well deserved, but I was left speechless last month when my latest statement arrived complete with a penalty for late payment despite my regular standing order having gone out at the usual time of the month. Closer examination of the new statement revealed that my payment date had magically moved from the 6th of the month to the 30th of the previous one, leaving me with a week less to settle any balance I may have and thus resulting in me incurring the charge the previous month. Yes, my fault entirely for not reading the small print on the last bill and noting the change, but heaven forbid they should have found some way of highlighting this arbitrary change in the conditions of my account, one which was likely to impact the way I manage my finances at that.
These are all very real issues faced by thousands of users of financial services nationwide. Where is the grassroots campaign against these kind of sharp practices though? If they exist then for the moment they are extremely well hidden. In the meantime self-styled “money saving experts” continue to bleat about the non-issue of overdraft charges and pledge to continue to look for loopholes to try to screw the banks some other way.
How on earth did these people get their priorities so wrong?