Unfair bank charges: six more months to wait

July 22nd, 2008

Following on from the post below, the banks have today been given an extra six months to contest the case brought against their unfair overdraft charges. This extends the period where all claims remain frozen, which has already been in place for a year, and means no refunds will appear for the foreseeable future.

The Financial Services Authority (FSA) said it has done this to help the courts decide the fairness of bank overdraft fees. Bank charge campaigners, on the other hand, said they were not surprised, but argued the situation was grossly unfair to customers.

Tens of thousands of bank customers have had their complaints put on hold pending a resolution on the legality of overdraft charges. Tens of millions of pounds are hoped to be divided between them if the case goes in favour of the consumers.

The FSA explained that it is extending the suspension of its normal rules, which require banks to deal with complaints promptly, because the High Court has still not decided if bank overdraft charges are unfair or not.

The FSA says it will review the waiver again before it expires at the end of next January. This means it could be extended even further.

A second round of High Court hearings involving the banks and the Office of Fair Trading (OFT), which may finally decide if bank charges are fair or not, is expected to start before the end of the year before Mr Justice Andrew Smith.

Earlier this year he ruled that the OFT had jurisdiction in the matter, and he has recently been asked to rule if fees levied under previous bank terms and conditions can also similarly be assessed by the OFT.

But any appeals on the issue of the OFT’s jurisdiction, or the fairness of the fees themselves, could drag out the issue far into next year.

There seems to be no end in sight for this issue which could have been solved by now if the banks had simply admitted they were in the wrong and refunded the money quickly.

All the signs are that the courts will continue to rule in favour of the customers, but the banks will fight to the end to guard their quick and easy but unjust stream of income, even threatening the future of free current accounts. This is a desperate tactic and must not be allowed to work.

Posted in Personal Loans | No Comments »

OFT slams the banks. Again.

July 18th, 2008

The Office of Fair Trading (OFT) has released a new report saying that personal banking in the
UK is ‘not working.’ This comes in addition to the ongoing furore over bank charges and the underlying threat that if banks cannot impose such charges current accounts will no longer be free.

The report says that the £8bn industry is not clear enough, with many consumers not knowing their account’s interest rate or what they pay in bank charges. The complexity of the market means that consumers are less likely to switch banks, the watchdog says.

The OFT said that much of the banks’ revenue from current accounts was “derived opaquely”. Some 81% of banks’ income came from charges to customers with insufficient funds in their accounts (£2.6bn) or interest payments (£4.1bn).

The report found that more than three-quarters of customers did not know the interest rate of their current account, while many did not know how much they paid in bank charges.

The complexity and lack of transparency of current accounts made it hard for customers to compare accounts from different banks, the OFT said.

The report comes as the OFT continues an investigation into the fairness of overdraft charges. The OFT has been given legal confirmation that it can rule if bank overdraft charges of up to £35 are fair or not. But eight banks are appealing against the initial decision in the High Court, that the OFT has the jurisdiction to assess whether fees are unfair.

There can be little doubt that the UK banks act like a cartel and with only their own profits in mind, and the threat that a decision outlawing bank charges will result in a charge being applied to current accounts is nonsense.

The smaller and internet banks are ready and willing to swoop in and seize disaffected customers from the major banks and charging for current accounts would be just the ammunition they need.

The OFT report and the ongoing bank charge argument underline one salient fact. If you want a better deal, better customer service and a better product, switch banks. There are better deals out there ready to be snapped up.

Posted in Personal Loans | No Comments »

3 hits at home and dark news from America as loan giants struggle

July 15th, 2008

Three different sets of figures have been released this week each revealing a different aspect of the turbulence facing the economy.

Figures released today have shown that inflation hit 3.8% in June, well above the Government’s target of 2% and an increase from 3.3% in May.

The figures, which came in above forecasts for the third month in a row, mean the Bank of England will now have less breathing space to cut interest rates. The Bank of England, which has already said inflation may top 4% this year, has to balance the need to control inflation with worries over growth.

The Bank is currently trying to balance growing evidence of an economic slowdown against the problem of rising inflation. Food and non-alcoholic drinks were the main factors fuelling the rise, with prices increasing by a record 2.1%, the ONS said.

Meanwhile, surging oil prices have driven up the cost of fuel with the average price of petrol increasing by 5.3p a litre.

Similarly gloomy news has come in from the high street. The British Retail Consortium has announced that like-for-like retail sales fell 0.4% compared with June 2007. Total sales, which include new stores, rose 2.1%.

Sales of food were up, but against the suppressed sales of a wet June in 2007. Food and drink was the only sector to show significant growth, the BRC said.

Clothing and footwear sales were the biggest losers, with furniture and homewares slipping further below the previous year’s levels.

Underlying High Street sales have now been lower than a year ago for three of the past four months.

Finally, the Royal Institute of Chartered Surveyors has announced that the number of people moving house is at its lowest level since surveyors started collecting records in 1978.

Rics said that demand from buyers remained low with many of them unable to get mortgages. However, there was one slight glimmer of hope since the number of surveyors reporting house price falls was not quite as high in June as it had been in May. People looking to take out personal loans have also found it more difficult.

All of this home grown gloom is complemented by the trouble of Frannie and Freddie in
America. If either firm were to fail, the consequences for the already fragile
US financial system would be disastrous as mortgage lending could virtually dry up. The knock on consequences for the
UK economy would be disastrous.

Posted in Personal Loans | No Comments »

« Older Entries

Newer Entries »