Unfair Banks Charges: The Latest

June 29th, 2009

The ongoing saga of banks charges is in the news again this week as the appeal case before the Law Lords comes to an end. Seven banks and one building society are trying to overturn two previous rulings that would let the Office of Fair Trading investigate their overdraft fees.

In all, nearly a million people have claimed for the return of their unauthorised overdraft charges but the cases are on hold and have been for some time. If the banks win this week’s appeal, these people are unlikely to get any money back.

If the banks lose, then the legal arguments should move on to an important stage, a case to determine whether these charges were fair or not. Only then will people have a clearer picture as to whether billions of pounds will be handed back to customers.

The OFT has said that it will still pursue bank overdraft charges as unfair, even if it loses the current legal appeal in the House of Lords.

The OFT argument is that bank customers were at a disadvantage at two separate stages, when they first opened an account and when they incurred the overdraft fees.

The Law Lords will now consider their judgement and may refer some issues to the European Court of Justice. That would further delay a final judgement on the OFT’s jurisdiction, in a legal process that started in July 2007.

At stake is the currently frozen ability of millions of customers to demand that their banks refund overdraft fees they consider too high. For the banks, an adverse judgement could lead to them repaying billions of pounds in past charges, and foregoing income of more than £2bn a year.

The banks argue that overdraft fees are part of the price paid by customers for having a current account, this leads to their arguments that if they are not allowed to levy these charges they may have to instead charge for current account facilities.

As I have said before on this blog I believe this to be an empty threat. There is enough competition in the UK banking market to ensure that current account charges are not feasible. The smaller and online banks would see this as a great way to challenge the market share of the large high street banks.

As ever with this story, no one should hold their breath. If the Law Lords pass the case on to the European Courts that will mean another year at least until a final decision and the banks will keep fighting all the way.

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Personal Data and PC Security

June 22nd, 2009

There have been two stories this week that demonstrate how the protection of personal data, especially on home computers used to access bank accounts, should remain a top priority for everyone.

The first story is that personal data including the signatures of recipients has been exposed to those tracking deliveries on the Parcelforce website. A failure in the system allowed people using the mail tracing service access to the name, postcode and signature of various addressees.

This information could easily me used by a fraudster to begin the process of stealing someone’s identity.

According to data protections laws, businesses have a responsibility to keep personal and sensitive information secure. Any organisation which processes personal information must ensure that adequate safeguards are in place to keep that information secure.

This was clearly not the case with the Parcelforce system.

This is not the first case of potential exposure of sensitive data. I’m sure everyone remembers the case from November 2007 when HM Revenue and Customs lost two computer discs that held the entire child benefit database, including the personal details of 25 million people, covering 7.25 million families.

And yet unwitting potential fraud victims do not only have to worry about their data being lost or stolen from third parties. According to the UK fraud prevention service, cases of “takeover fraud” in the UK increased by 75% in the last year.

This means that instead of fraudsters using stolen details to take out credit, they takeover the existing bank accounts of their victims. This fraud is thought to have become more popular because of the problems fraudsters have had getting credit from recession hit banks.

Usually, victims do not even know that the fraud has taken place. The number of malware programmes – an umbrella term which encompasses viruses, spyware and other malicious software – jumped by more than 400% last year compared with 2007.

With more and more people placing sensitive data online it is vitally important that they know how to protect it. Searching for loans online is a good way of finding the best deal quickly, but customers should always check that websites are genuine before they input their details.

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The CPI vs the RPI. Which to believe?

June 16th, 2009

There are two linked but peculiarly contrary items of news this week. The Consumer Prices Index (CPI), which is the Government’s preferred measure of inflation, fell to 2.2% from 2.3% in April. However, the Retail Price Index, which is generally considered to be the more honest measure of inflation, fell to -1.1%.

Apparently, the biggest factor restricting a sharper fall in the CPI was the rise in alcohol and tobacco prices, reflecting the increase in duties introduced in the Budget in April.

Meanwhile, the dramatic fall in the cost of a typical family’s weekly essentials has been driven by sharp declines in mortgage costs since last year, while petrol and diesel are also much cheaper than a year ago.

The CPI measure of inflation has now been above economists’ expectations in five of the past seven months but it is expected to continue falling to below 1pc in the coming months.

Interestingly enough, overall household costs, which cover utilities, council tax and insurance, are 17pc lower than a year ago, while transport costs have fallen by 16pc. These falls were partly offset by a 9pc rise in food prices, adding £2.94 to the cost of a typical basket of essentials, which now costs £35.20.

These confusing figures underline one major point, which is that the UK economy is still in a dichotomy. At the moment, with all other things being equal, there is enough data to support both optimistic and pessimistic points of view. The problem of course it that life never allows everything else to be equal.

If unemployment continues to rise as is expected, the optimists may find themselves relying on pure hope rather than statistics.

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