No new UK bank charge complaints for another six months

July 23rd, 2009

Some people work with the court system on a day to day basis and the bank charges saga has set me wondering how they achieve anything at all, even over the course of an entire career.

This week we have heard that the banks will not have to deal with new complaints about unauthorised bank charges for yet another six months.

The Financial Services Authority (FSA) has extended the “waiver” on complaints about excessive overdraft charges because a test case is still going on. The extension means the period of grace for banks will now end in January 2010.

Law Lords will rule on the latest stage of the test case in the autumn, but the legal battle is expected to continue for some time.

“Although the test case is progressing well, we still do not have certainty on this complex issue,” said a spokesman for the FSA.

This is the third time that the original waiver, first granted in the summer of 2007, has been extended. All new claims against banks were effectively suspended in July 2007 when the Office of Fair Trading (OFT) and seven banks, along with the Nationwide building society, agreed to stage a test case to see if their controversial overdraft charges were legal or not.

Following a three-day appeal in the House of Lords in June, all parties are now waiting for their decision on whether to uphold the right of the OFT to regulate bank charges.

Nearly a million people have claimed for the return of their unauthorised overdraft charges but their cases are on hold

As I said recently, if the banks win their latest appeal, these people are unlikely to get any money back. If the banks lose, then the legal arguments should move on to a key 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.

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UK savers feeling safe again

July 23rd, 2009

Firstly, let me apologise to readers for my silence for the last two weeks, I have been on holiday and expected to have adequate internet access but was disappointed.

While I was away, the government-backed National Savings & Investments (NS&I) has said that the flight to safety by savers who lost faith in the traditional banking sector is over.

NS&I, which runs Premium Bonds and a variety of savings products, said in its annual report it had been hurt by a return of confidence in banks. Customers ploughed money into NS&I at the height of the crisis because they saw it as a haven for savings.

But in the past three months, they have withdrawn more than they have put in. NS&I, which sees its profits go to the Treasury, experienced inflows of £26bn in the 2008-9 financial year and reported a £12.5bn net financing surplus.

However, it said there was now a “more challenging savings environment”, as it reported £4.5bn in gross outflows of cash in the three months to the end of June, which outstripped inflows of £3.2bn over the same quarter.

At the height of the global financial crisis last September, savers were dividing and moving their funds because of concerns over the future of some banks.

Despite government guarantees that savings were safe, many moved their cash to NS&I and other government-backed institutions such as Northern Rock.

Some banks and building societies were unhappy about the perceived extra safety of NS&I, but it did not launch any extra marketing as a result.

There has now been a clear change in the picture for savers. We have seen a major shift in the market in the first quarter of the year which is a good thing because confidence is a returning to the financial services sector.

Banks and building societies have been offering more attractive interest rates in an attempt to attract more depositors, with a string of new savings products being launched with interest well above the Bank rate of 0.5%.

While it remains the case that many savings accounts are languishing with very low interest rates, pro-active savers can still get good deals if they are prepared to move their funds around to new accounts.

Yet savers should still be alert to the fact that many of these deals are only available to new customers, not to people shifting their funds from a different account within the same bank.
Others offer an introductory bonus that gives a high interest rate for a limited amount of time after opening an account.

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UK loan defaults continue to rise

July 7th, 2009

The Bank of England (BoE) has conducted research that shows that the number of people defaulting on personal loans and mortgages is rising and is expected to continue rising for some time.

The research investigated banks and building societies and found that found more people are failing to repay their loans and mortgages and the interest due on them.

Unsurprisingly, the state of the economy, including rising unemployment, is key to understanding the rising figures.

The poll also found that lending to businesses had not risen as fast as had been expected in the past three months. This is a key factor in helping the economy return to growth and has been a central plank of the Government’s anti-recessionary activities.

Analysts and financial institutions have expressed confidence and said that they expect the availability of credit to businesses to rise in the next three months. It will take some time for this to filter through the economy, however.

The BoE research also looked into household credit. It found that householders were likely to be offered, and indeed demand, more credit which was secured on their homes in the next three months. This did not include short term credit like store cards, payday loans and cash advances from credit cards, which were expected to be squeezed slightly over the next quarter.

The BoE research is not overly encouraging about the outlook for bank lending. Overall, the evidence shows that lending will not rise by enough to support a strong and sustained recovery in the wider economy.

The Council of Mortgage Lenders (CML) has said that some government-supported banks have promised to increase lending, but others were in a much tighter position.

A rapid return to pre-credit crunch lending volumes and products remains extremely unlikely.

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