EDITOR’S BLOG: Your money and a bunch of bankers
Today’s figures from price comparison firm uSwitch on bank charges make eye-watering reading from where I’m sitting.
In summary: just under 19 million people have been hit by bank charges at some point, generating income of £4bn for the banks: there are approximately 159 million ‘chargeable events’ on current accounts, and 43% of UK current accounts holders have incurred, on average, eight charges at a cost of £26 each: of the 1.25% of people who took their bank to court, 14% had their current account closed as a result. Most significantly, perhaps, £2.12bn is waiting to be reclaimed by consumers at a cost of just £10 each, the price of copies of your previous bank statements.
So why are people being stung for these charges? Exceeding an authorised overdraft limit is the most popular reason, affecting 71% of UK current accounts holders. On average, consumers say that they have been charged between three and four times for this reason by their current bank, while 10% say they have been hit more than 10 times.
Direct debit and standing order payments made from accounts with insufficient funds have affected over half of consumers (58%), who have been charged between two and three times for this, while 7% have been charged 10 times or more.
You get the big picture, so let’s zoom in on a detail and look at one customer’s experience with her bank. Kathy Freeman is 34 and is an office manager at a recruitment consultant in London. She has worked consistently for the past 14 years and, until recently, has had few problems with her bank – one of the big five of high street giants that has been announcing profits of billions of pounds in recent weeks.
“I am getting married and have been spending a lot over the past few years on preparing for the big day,” she explains. “About a year ago I went slightly overdrawn and failed to notice that I had exceeded my limit.
“It was soon drawn to my attention, though, as my bank sent me a letter pointing out my error and charging me £26 for the pleasure of informing me about the problem. As an administrator myself I know that there is no way that a letter costs £26 to write and send, especially if it is a ‘pro-forma’ that comes out of a printer in quantities of millions at a time.”
Kathy contacted her branch to say that this was the first time she had been overdrawn after more than 15 years as a UK current accounts holder at the bank. Ever sensitive to the needs of its customers, the bank basically said ‘tough luck’. Kathy threatened to write to the Financial Ombudsman with an official complaint and her bank confirmed that she had the right to do this – but still offered no refund. She finally took the bank to court and – hey presto – the money was refunded before it went before the court.
Nick White, director of financial services at uSwitch, says: “While the majority of banks are bending over backwards to refund bank charges to those customers that take the initiative to fight back, this is not because the banks have gone soft in the last couple of months.
“They would simply rather settle now than to have to appear in court and face a damaging test case which could set a dangerous legal precedent. However, the fact remains that only a court can determine whether a charge is unfair or not, and a test case may be the only way to resolve this issue once and for all.”
From the banks’ point of view, however, this may be a test case too far.