Are Banks Exploiting Customers Through Overdraft Charges?

[Art]

There is something you can do. Here's an article about a current court case currently being taken by the OFT in the UK.

http://www.personalfinanceclaims.com/category/bank-charges/

This has been a frontline issue for a while now and there is a standard claim form available on some website but I can't find it right now.

 

[cristo]

This has been a frontline issue for a while now and there is a standard claim form available on some website but I can't find it right now.

There used to be a form available here but the Financial Ombudsman is not providing support on these issues until the court case brought about by the Office of Fair Trading is over.

 

[cristo]

In the US and Canada at least (I'm not in the UK, so I don't know for sure about there) you have a credit rating with a few different companies, which follows you no matter where you go. I don't imagine the situation is much different in the UK.
Just searched, Wikipedia: http://en.wikipedia.org/wiki/Credit_rating under the heading `Credit Rating Agencies'. Apparently you guys are in the same boat as us, and your credit rating follows you everywhere.

Yes, credit ratings are dealt with by a couple of central companies. You know, you can get a copy of your credit rating if you apply to one of the companies (SD).

I'm afraid I agree with NeoDavin here, for the most part. I don't agree that £30 overdraft fees are "fair" in the sense that they are unnecessarily large, but they are not unfair in the sense that they are unpublished or unexpected.

 

[humanino]

It is an inconvenience, and costs the bank money when an account is overdrawn.

Sorry but I do not believe it would cost them much more than a few $, or maybe tens of $ that one account is $500 overdraft for like 4 days. They made $1000 for a $500 credit of 4 days (technically even less than that, since I spent about half of the overdraft in bewteen). This is insane when you think about it. As a courtesy to the customer, not responsible for someone else mistake, they could have canceled the charges.

In any case, frankly waking up every morning asking myself how much I am going to make today, knowing that 90% of it is taken from people's pocket, thank you I'd rather do something else with my life

 

[Evo]

All of my banking is free, unless I dip into my credit line.

I've had two errors. First one was a bank error where they debited my account for $270.50 for a check written for $27.50. As soon as I brought it to their attention, they corrected it.

The second was not a bank error but an error by my car insurance company <cough> AAA <cough>. They did an automatic bank debit each month of $127.00. Except one month they accidently debited me $1,270.00. This caused several checks to bounce, it caused me overdraft fees and insufficient check charges, none of which were my fault. They were impossible to deal with. After 3 months of daily calls, they said that they would send me a refund by mail, but not willing to cover the hundreds of dollars in overdraft fees. Although they had electronically debited me the wrong amount, they said that they would not electronically credit me back for the error.

<cough AAA cough> Make your own decision.

 

[Art]

All of my banking is free, unless I dip into my credit line.

I've had two errors. First one was a bank error where they debited my account for $270.50 for a check written for $27.50. As soon as I brought it to their attention, they corrected it.

The second was not a bank error but an error by my car insurance company <cough> AAA <cough>. They did an automatic bank debit each month of $127.00. Except one month they accidently debited me $1,270.00. This caused several checks to bounce, it caused me overdraft fees and insufficient check charges, none of which were my fault. They were impossible to deal with. After 3 months of daily calls, they said that they would send me a refund by mail, but not willing to cover the hundreds of dollars in overdraft fees. Although they had electronically debited me the wrong amount, they said that they would not electronically credit me back for the error.

<cough AAA cough> Make your own decision.

That's why standing orders are safer than direct debits. I'm always very reluctant to give anybody unfettered access to my current account.

 

[russ_watters]

I don't understand the attitude that enables people to enter a contract, break it, then blame the other party for enforcing the penalties they agreed to when entering into the contract in the first place.

Take responsibility for your mistakes.

 

[NeoDevin]

Sorry but I do not believe it would cost them much more than a few $, or maybe tens of $ that one account is $500 overdraft for like 4 days.

It's $500 of unexpected negative cashflow for the bank. Believe it or not, that can actually get expensive. Of course they charge a lot more than it costs them, that's called `profit margin'. There are many companies which charge hundreds if not thousands of % profit margin, which we willingly pay for the convenience of the service they provide. If someone doesn't want to pay overdraft fees, then why would they allow their account to go into overdraft? What would such a person do if there was no bank to provide them the overdraft service? The bank has the right to charge whatever price they think fair (within gov't regulations) for their services, just as each of us has the right to not use those services if we think the price unfair.

To cry foul at the bank for charging fees which were agreed upon, in writing, upon the opening of the account is simply immature, and refusing to take responsibility for one's actions. And if people talk half as badly to their bankers/bank managers as the talk about them on here, it's no wonder they won't give them a break on the fees.

 

[Schrodinger's Dog]

I'm still running on the assumption that the fee structure was made clear when the account was opened.

It was I got a £300 overdraft, which was then refused under the same conditions, nothing had changed, I went out of my way to prove that. Since you patently aren't listening to a word I say I'll ignore the rest. It's not worth my time repeating myself, you're possibly one of the same people that think banks are nice lovely businesses that love their customers. Welcome to the real world. Have you ever wondered why everyone hates banks? It's because they are abusive to their customers, by charging ridiculous fees and doing their utmost to force people into debt to rake in the profits. Simple as that. The only people who don't hate banks I've met are the people who work there, and even they aren't particularly impressed by them, sometimes.

http://www.personalfinanceclaims.com/category/bank-charges/[/QUOTE]

Thanks Art, finally someone who is listening.

I don't understand the attitude that enables people to enter a contract, break it, then blame the other party for enforcing the penalties they agreed to when entering into the contract in the first place.

Take responsibility for your mistakes.

I didn't are you reading any of this or am I just talking to a brick wall? Like with the other guy?

They broke their own terms. I refused to pay the first time, they wrote it all off except the original charge. The second time, they broke their contract and abused their own terms. The third time, they have been charging me for going overdrawn for the last 5 months despite only being overdrawn for 2 of them. Is that clear or do you want me to say it again?

 

[cristo]

They broke their own terms. I refused to pay the first time, they wrote it all off except the original charge. The second time, they broke their contract and abused their own terms.

How did the second bank break their terms of contract? From what I read, you agreed a £300 overdraft facility with the bank, then reduced this to £50 since you didn't need it anymore. Later, you went into the bank and asked them to increase your overdraft once more, to £150. If this is the correct scenario, then I can't see where the bank broke any terms of contract. I will bet that their terms say something like "a customer passing criteria x is eligible for an overdraft of y% their annual income" and not "a customer passing criteria x is entitled to an overdraft of y% their annual income." These are very different things. The bank does not have to provide you with an overdraft if it doesn't want to, regardless of your financial situation.

 

[Schrodinger's Dog]

How did the second bank break their terms of contract? From what I read, you agreed a £300 overdraft facility with the bank, then reduced this to £50 since you didn't need it anymore. Later, you went into the bank and asked them to increase your overdraft once more, to £150. If this is the correct scenario, then I can't see where the bank broke any terms of contract. I will bet that their terms say something like "a customer passing criteria x is eligible for an overdraft of y% their annual income" and not "a customer passing criteria x is entitled to an overdraft of y% their annual income." These are very different things. The bank does not have to provide you with an overdraft if it doesn't want to, regardless of your financial situation.

They refused to let me have an overdraft despite 1/3 of my income being about £350. According to their terms the only reason they could deny this is if I a)had poor credit history b) there was bad equity on a pre existing loan or mortgage. They said you can have a credit card £3000 limit though, I was not amused. Why am I the only customer at that bank not allowed a 1/3 of your income overdraft, riddle me that? No one ever explained why they just said I couldn't have it because the computer had refused it, no reason nothing. It's pathetic frankly. I tell you what I think is the reason, they had flagged that I didn't own a credit card so the computer refused it to try and put pressure on me to get a credit card, which just so happened to be a drive they were doing at the time. Despite repeatedly requesting a reason why the overdraft facility had suddenly been reused for no reason, they refused to answer. I picked up my money and walked. Basically because they wanted to force me into credit, at 13/7% instead of 1.7%. I was not amused. And the bank manager just fobbed me off, trying to explain the reasoning in terms of? To be frank I don't even think he understood why it had happened, in fact at one point he said, I know the reason doesn't seem obvious but there must of been some reason. Yeah I know, you just know full well you can't come out and say you are trying to get all customers into credit, rather than on overdrafts.

The bank can do whatever it likes, but since they're losing a lifetime customer, do you think it's wise to screw your customers over for no reason? Or at least no reason your prepared to admit. In the end how much money did they lose, on my custom, interest and mortgage being elsewhere? A truck load, idiots.

Since one of the morons got fired for even more dubious practices a few months later, and I haven't heard hide nor hair of the other guy since. I'm hoping they got fed up with them and sacked them both? Don't know though?

So Mr Bank manager can you explain why you lost this customer, and a rather sizeable credit agreement? Because I'm an idiot who can't overrule a computer sir. Er pick up your pay check on the way out and your P45.

 

[brewnog]

They charged interest recently and put me into the red by a £1 or so, and then have proceeded to charge me £200 again for charges.

Firstly, if you were in the black, why did they charge interest?

Secondly, £200 is a LOT for a charge for exceeding an overdraft limit by £1. Which bank is this? You ought to look into getting some advice from the financial ombudsman's service, though I sincerely doubt that they imposed a £200 charge just for exceeding your limit by £1.

How about this: Try and be more careful with your money! If you're aware of your incomings and outgoings, you can quite easily avoid going overdrawn. If you find this difficult, ask your bank to prevent your account from exceeding your agreed overdraft limit.

If you can't get an agreed overdraft, the reason is most likely that your credit history is poor enough for them to consider you too great a financial risk (probably because of all those times you've exceeded your agreed overdraft limit, and not been able to pay it off). If you want to know for sure, get a copy of your credit report.

 

[Schrodinger's Dog]

Firstly, if you were in the black, why did they charge interest?

Secondly, £200 is a LOT for a charge for exceeding an overdraft limit by £1. Which bank is this? You ought to look into getting some advice from the financial ombudsman's service, though I sincerely doubt that they imposed a £200 charge just for exceeding your limit by £1.

How about this: Try and be more careful with your money! If you're aware of your incomings and outgoings, you can quite easily avoid going overdrawn. If you find this difficult, ask your bank to prevent your account from exceeding your agreed overdraft limit.

If you can't get an agreed overdraft, the reason is most likely that your credit history is poor enough for them to consider you too great a financial risk (probably because of all those times you've exceeded your agreed overdraft limit, and not been able to pay it off). If you want to know for sure, get a copy of your credit report.

That's how much the eventual charges will come to, once I've finished paying them off. And yes I should, but to be honest, I have a better solution, why not just leave the bank, open a new account at another bank, or building society and forget they exist. If they then want to take me to court for the money they are welcome. How about that?

I'd be surprised if they would even bother trying to reclaim £300 or whatever it turns out to be. But if they want to charge me for something I haven't done, then let's see what a judge thinks.

They seem to think that because I am poor they can just keep racking up the fees until it reaches thousands of pounds, I for one am not going to put up with it. I've put £200 in that account already to try and keep up and it's not enough, so screw them.

I remember a time when you could trust the banks, they were reasonable, they would not let you take out credit without subjecting you to rigorous practices, then the conservatives removed them all, and since, anyone can rack up £40,000 worth of debt in not time. It's sad really. Because what they are essentially doing is using lax lending laws to exploit human nature. I mean you don't expect business to care about anything but profit. But you do at least expect a modicum of customer service with that stabbing you in the back, as they have in my case. Professionalism it seems is not a word my bank understands nor cares about. Still there's a reason why Nat West was voted one of the worst banks in the country. I believe the worst was The Bank of Scotland, owned guess who by? Nat West. If you want a decent bank I've heard HSBC aren't total ****s, my next point of call.

 

[NeoDevin]

HSBC will look at your credit history as well, and see the overdrafts, and the refusal to pay, and will probably refuse to grant you overdraft as well. You're responsible for your own situation, for the contracts you enter into. Stop blaming your own screwups on others, and take responsibility for your own money.

 

[Schrodinger's Dog]

HSBC will look at your credit history as well, and see the overdrafts, and the refusal to pay, and will probably refuse to grant you overdraft as well. You're responsible for your own situation, for the contracts you enter into. Stop blaming your own screwups on others, and take responsibility for your own money.

I haven't got a bad credit history, is no one paying attention here , that is a last resort anyway if they refuse to remove the charges. And if they don't contest it or I win then they can't put it as a mark against my credit history. To be frank I'm pretty sure banks don't press to take that tiny amount of money to court, it's worth more in administration than they are ever likely to get back. Assuming I open an account now my credit history is currently flawless, as I said before. So there's not going to be anything on it anyway. I love it how many people think that what the bank is doing is fine. I just hope it never happens to you, because you'll be surprised at how annoying it is. Especially when without friends and family I'd basically be even more in debt probably to the tune of another £100.

 

[cristo]

And yes I should, but to be honest, I have a better solution, why not just leave the bank, open a new account at another bank, or building society and forget they exist. If they then want to take me to court for the money they are welcome. How about that?

But this is only going to affect you and your credit rating. The bank won't think twice about losing £200, but you will be hit hard when you try and open an account at a different bank and realize that your credit rating has become even worse.

I'd be surprised if they would even bother trying to reclaim £300 or whatever it turns out to be. But if they want to charge me for something I haven't done, then let's see what a judge thinks.

If you can't afford to pay the charges, then I doubt you'll be able to afford lawyers fees to take a bank to court!

I remember a time when you could trust the banks, they were reasonable, they would not let you take out credit without subjecting you to rigorous practices, then the conservatives removed them all, and since, anyone can rack up £40,000 worth of debt in not time. It's sad really. Because what they are essentially doing is using lax lending laws to exploit human nature. I mean you don't expect business to care about anything but profit. But you do at least expect a modicum of customer service with that stabbing you in the back, as they have in my case. Professionalism it seems is not a word my bank understands nor cares about.

But you can't blame a bank for people getting into too much debt. In order to borrow money, you have to be over 18, i.e. an adult. Why should the bank have to hold an adults hand when making a decision? If someone is not able to pay back the money borrowed, then they should have thought more seriously before borrowing the money.

Still there's a reason why Nat West was voted one of the worst banks in the country. I believe the worst was The Bank of Scotland, owned guess who by? Nat West. If you want a decent bank I've heard HSBC aren't total ****s, my next point of call.

I'm with Natwest and think they're a decent bank. They've got UK callcentres, and actually give out the number to your branch so you can call your manager direct. Further, the one time I had to contact the complaints department (when I moved to university they sent my card to the wrong address, then canceled it, then sent another that got lost) my problem was resolved efficiently within a few weeks, and they gave me a very reasonable amount of compensation. That might be because I've been with them ever since I got my first account when I was 13, and had never gone overdrawn or anything like that.

If you keep changing banks, then this will show on your record, and you're a lot less likely to be given the perks that a "good" customer would be.

 

[Schrodinger's Dog]

Well like I said if I open an account now, I am fine, because my credit history is fine. I don't care what they think they're doing here, I'm not paying it. It's ridiculous. If they'd of just charged me once for going overdrawn, but the fact that it rolled over without my knowledge meant I got another fine and another roll over, before I realized what was going on. Of course I'd already asked them to remove it by then. It's not holding my hand it's just not being aware of rollover fees. Whereby they charge you twice for the same charge. Of course they neglected to tell me this when I asked them to remove the charges. I am simply not in a position to pay off that much in that short a period atm. And they have already told me they can't remove the charges for charges for charges. So we're stuck.

Christo I appreciate your advice really. And I know they are one of the best banks for students, I was one. And they were really good then. I never got any of these problems then, in fact they'd remove excess charges when I asked. But apparently now its all different.

 

[cristo]

Assuming I open an account now my credit history is currently flawless, as I said before.

But how do you know this? You're just guessing! I'd say that if you've gone over your overdraft in more than one bank, and haven't paid the charges, then you're very likely to have a poor credit rating!

 

[Schrodinger's Dog]

But how do you know this? You're just guessing! I'd say that if you've gone over your overdraft in more than one bank, and haven't paid the charges, then you're very likely to have a poor credit rating!

I know because I had to get one to prove to my last bank my credit was ok. And since I've not taken out any loans since then or any other credit, or reneged on payments of said loans, I can't see how it would have changed. 1st bank I had them removed after kicking up a fuss. Second bank I paid because I was working but left the bank. So there's no reason for a poor credit rating at all. And since its under £1000 pounds you can get the fees paid if you win I believe as its small claims. To be frank they won't contest it most likely anyway. Or I can fill in that form and wait for the procedure to begin. Of course all cases of this nature are currently frozen until the test case goes through. Like I said that's a last resort if they refuse to be reasonable about it though.

 

[Schrodinger's Dog]

Not that anyone's interested but I wrote a letter to the bank yesterday and hand delivered it, saying that I would not pay the charges and would be moving my account elsewhere if they were not removed. Since then I've accrued another charge, because the interest on the charges was more than I had accounted for, which then took me 40p overdrawn, of course because this month and every month are a rollover month, that's another £56 in charges in this diabolical lottery. My mistake, obviously I hadn't accounted for the mysterious leap in interest from £3.46 to £5.40 despite owing less than the last time. Honestly I just can't figure it out any more? Is the interest x percent? Or is it not? I am actually not bad at maths, but I think the bank is working on some advanced quantum system where there is a superposition of interest, interest, and no interest, no interest. Because obviously there are two sets of interest and no interest, thus the extra \dag charge applies.

\dag The bank can and will obey all laws of quantum indeterminacy when working on your accounts, we reserve the right to screw you over accordingly.

 

[Art]

But you can't blame a bank for people getting into too much debt. In order to borrow money, you have to be over 18, i.e. an adult. Why should the bank have to hold an adults hand when making a decision? If someone is not able to pay back the money borrowed, then they should have thought more seriously before borrowing the money.

And in this perfect world there should also be no crime so why not get rid of the police force?

If you think adults are capable of making informed financial decisions simply because they are adults (banks too for that matter) then presumably you are blissfully unaware of the current sub-prime banking crisis??

 

[Schrodinger's Dog]

And in this perfect world there should also be no crime so why not get rid of the police force?

If you think adults are capable of making informed financial decisions simply because they are adults (banks too for that matter) then presumably you are blissfully unaware of the current sub-prime banking crisis??

Funnily enough I haven't been following what banks are getting up to these days, except when they go bankrupt, then it's schadenfroider all the way. http://news.bbc.co.uk/1/hi/business/7007076.stm"

I'd quite happily get rid of idiots who believe that a computer should have more power than the bank manager.

 

[NeoDevin]

Is the interest x percent? Or is it not?QUOTE]

Again, I don't know for sure about the UK, but here the interest they charge on things like overdraft is based (at least in part) on the current interest rate the government set, which is subject to change without notice. You can get fixed rate loans, in which the interest rate doesn't change, no matter what the government rates do, but I've never heard of anything like that on overdraft.

 

[Schrodinger's Dog]

Again, I don't know for sure about the UK, but here the interest they charge on things like overdraft is based (at least in part) on the current interest rate the government set, which is subject to change without notice. You can get fixed rate loans, in which the interest rate doesn't change, no matter what the government rates do, but I've never heard of anything like that on overdraft.

I don't think it changed by that much overnight. Knowing them it was some hidden charge they neglected to mention that was going through in addition to the interest, I'll find out on my next statement. I just think the way I've been treated is shocking, I hope when people say not all banks are like these, they are correct.

I was talking to someone yesterday who built up £5400 pounds in charges, so he applied to a company (there are now companies that specialise in suing banks for this reason alone) and they said the amount of money he was paying was about the same as his wages going in. Jesus! Needless to say he got it all back.

 

[mgb_phys]

Again, I don't know for sure about the UK, but here the interest they charge on things like overdraft is based ..on the current interest rate the government set,

The UK banks got into trouble for very high charges in addition to the interest rate.
So if you go overdrawn by a very small amount they charge you £50 and then charge you another £50 if the previous £50 took you further overdrawn.
This recently was ruled illegal and the charges are now limited to the actual cost of telling you that you are overdrawn.

In the UK paying bills by automatic direct debit is much more common so it is very easy to go overdrawn at the end of a month when you are paid on 'last friday of the month' basis but your bills go out on the 28th because the bank regards that as the end of the month.

 

[Schrodinger's Dog]

I thought there was a test case going through at the moment over charges. If I'm not mistaken until this case is resolved there is no legal requirement as such. Although I could be out of date. That said I'd be doing this if it was legal or not. I don't mind paying if I accidentally go overdrawn once. But multiple times is just excessive, I genuinely have been trying as hard as I can to keep up with the charges, once I realized they were doubling them up, but I just can't. Like I say £200 or so pounds may not seem like a lot of money to be throwing into your account over a few months, but when you're not working it is an awful lot. It turns out I would of had to have put in £300 or so to cover it. I just don't see how it's reasonable to keep charging me, despite me telling them that I can't keep up? Anyway I'll see what the bank manager decides to do and take it from there.

 

[B. Elliott]

I thought there was a test case going through at the moment over charges. If I'm not mistaken until this case is resolved there is no legal requirement as such. Although I could be out of date. That said I'd be doing this if it was legal or not. I don't mind paying if I accidentally go overdrawn once. But multiple times is just excessive, I genuinely have been trying as hard as I can to keep up with the charges, once I realized they were doubling them up, but I just can't. Like I say £200 or so pounds may not seem like a lot of money to be throwing into your account over a few months, but when you're not working it is an awful lot. It turns out I would of had to have put in £300 or so to cover it. I just don't see how it's reasonable to keep charging me, despite me telling them that I can't keep up? Anyway I'll see what the bank manager decides to do and take it from there.

I know exactly what you are talking about. This happened to me over a year ago and I just recently fully recovered from it. I've never studied up on how money actually flows through the bank, but some of the penalties seem more like schemes. ie; when/if someone makes a mistake, they nail you to the wall with charges regardless if you are habitual or not. I came to the conclusion that the smaller "hometown" banks aren't near as bad. They appreciate your business vs. a large corporation where you're just and Acct# and that's it. That's why I refuse to let a large corporation make more dollars using my money. I'd rather it go to the people that truly appreciate me being with them.

No to stray off topic, but this thread reminds me of Louis CK...

 

[cristo]

And in this perfect world there should also be no crime so why not get rid of the police force?

Well, that's completely irrelevant.

If you think adults are capable of making informed financial decisions simply because they are adults (banks too for that matter) then presumably you are blissfully unaware of the current sub-prime banking crisis??

Quite frankly, it doesn't matter whether adults indeed are capable of making informed financial decisions, but the important thing is that they should be! Why should I have to pay solely due to the fact that some people are too irresponsible with their money? I'd much rather that fees were charged to the people that break the terms and conditions of their contract than fees are charged to everyone to cover for the fact that some of these people will break the terms and conditions of their contract.

I'm sorry, but the answer to the problem of fees is: if you don't like them, then don't go overdrawn!

 

[Schrodinger's Dog]

Everyone goes overdrawn, they don't expect, nor should they be expected to be charged twice for it. I don't make a habit of it. But like most people, I'm not going to be ripped off by people who have little or no consideration for my financial position. There's a reason why this sort of thing is being brought before the courts, and guess what, it isn't because some people are bad with their money. I don't see how anyone else is affected by my charges anyway. I'm not asking them not to charge me if I go overdrawn, I'm asking them not to rack it up, because I can't keep up with the charges.

I don't see how going £1 overdrawn once in a blue moon is being irresponsible with your money anyway. It's hard to keep up with the ins and outs of an account sometimes and mistakes are made. If I was doing it persistently, I could understand. In 8 years I've gone overdrawn 3 times. That's hardly irresponsible.

Although it's a side issue I think the fees are patently unfair anyway. It costs them mere pence to process an overdrawn account, I don't see where the £28 comes in there, do you?

 

[montoyas7940]

Fees are one of the most effective ways for a bank to profit. They take advantage of peoples poor money habits. And plenty of people have very bad money habits.
My bank does this thing that drives me nuts. They post debits largest to smallest so if someone overdraws it is more likely to generate multiple overdrafts. I think that is just wrong.

BUT!

If you are repeatedly finding yourself frustrated with your bank over your overdrafts maybe a slight modification to your behavior is in order. Have you considered keeping a pad (emergency fund) of extra money in your account. Pretend it does not exist. And don't spend it no matter how bad you want something. It is hard at first but it gets easier.