What would be a fair charge?

[Guest NATTIE]

I appreciate this site is mainly for the recovery of unfair charges but what would you consider a fair charge for the following:

 

 

 

1)Returning a Direct Debit or Standing Order

 

2) Card misuse(where a card is used and payment goes through the account taking it further into an unauthorised overdraft)

 

I am interested to know what other people think would be a fair charge. I know that on another thread someone said a friend of theirs who worked for Lloyds said the true cost of returning an item was £1.20.

 

Would that be fair?

[Tygermoth]

I would be happy to pay the TRUE and ACTUAL cost - broken down for me in writing.

 

I would not settle for anything else.

 

tyger

[Guest NATTIE]

How would that work in practice? Cost of electricity to return DD(which could conceivably done either automatically or manually). Would the charge be different for someone who had it returned automatically or by the manual push of a button?

 

I'm simply saying if the bank say that £x is the true cost would you then say to them to give a breakdown of how that was made? And would you actually believe them?

 

If the bank states a set cost, would that be sufficient? What if another bank has a higher cost or lower cost?

Do you see where I'm heading on this one? How do you quantify a true cost?

[alanfromderby]

Somewhere on the forum - and we are talking a few months ago, a survey was carried out and the general consensus was that £2 was a fair charge.

 

It is worth having a good look through the OFT statement, as it clarifies what a bank can include within it's calculation - and what it can't. It is also worth remembering that their £12 limit was just a level at which they would intervene.

 

I really do wonder what their report would have said if it had been produced three months later than it actually was.

[Guest NATTIE]

I apologise if this seems pedantic, but as I'm sure you're aware that different banks charge different amounts, would the charge be fair if it went up, I'm sorry if this sounds silly but for example, if the electricty bill goes up.

I guess what I'm getting at is how is a fair charge could be calculated? Reason being that under contract law it is between one person and the Bank. Now say a bank has 3 million customers(I know most high street banks have more). Would that cost be lower than say a Building society who would have lower costs?

[alanfromderby]

Yes, I agree that would be the case, and that also reflects the view of the OFT.

 

I really do suggest you read the OFT report as it clearly lays out how companies should calculate their charges - and that calculation does factor in the amount of customers on its books.

[lookinforinfo]

If the banks do finally put their house in order and charge the correct amount for

unauthorised transactions, it will be interesting to see the differential charges

involved between returning a cheque and a direct debit.

 

In Australia and the USA, surveys have suggested that to return a d/d costs around

65 cents-though admittedly the surveys are a few years old now. The cost of

returning a cheque was closer to $5 to $6. Rather begs the question as to why

we are charged the same for either breach. "Fair and reasonable"-yeah right.

 

I expect that the costs here will be more expensive than America and Oz simply

because our cost of living is higher here. Property, fuel, wages, electricity and

gas prices all help to distort our costs.

[Guest NATTIE]

alanfromderby can you give me a link as i've looked at OFT and cannot find specifics

[alanfromderby]

Press Release:

 

Current credit card default charges unfair

 

 

Calculating fair default charges in credit card contracts (PDF):

 

http://www.oft.gov.uk/NR/rdonlyres/2EBC491E-303E-4FAA-A24D-32EF8396255E/0/oft842.pdf

 

Guide for consumers (PDF):

 

http://www.oft.gov.uk/NR/rdonlyres/DF19FDA9-1D31-4B18-B251-9BF5AF6A29D4/0/oft842a.pdf

[Guest NATTIE]

Thanks mate but if I'm right from the link this is specifically on CC charges not Bank charges, What about bank charges on personal/business bank accounts?

[alanfromderby]

If you read the first of the PDF documents - this is the final paragraph:

 

 

 

Implications for other standard default charges to consumers

5.14 The broad principles set out in this statement are likely to be relevant to other default charges in standard agreements with consumers, such as those for mortgages, store cards and bank accounts. We expect the banks and other finance businesses to consider the wider implications of these principles, and to bring any similar charges they impose for breach of contract into line with them, where and as appropriate bearing in mind the different legal and practical contexts in which they operate. If appropriate steps are not taken within a reasonable timescale, further regulatory investigation of the position can be expected.

[thewifeandI]

I also think that a bank should only have one penalty action per transgression - currently there can be three penalties incurred by paying an item that exceeds the overdraft limit: -

 

1. Charge for paying the item - £39

2. Fee for exceeding limit - £28

3. Penalty rate of interest on the overdraft (sometime only the exceeded part) - 29%

 

And that is without counting the knock-on effect of the loss of those funds on the running balance in following months.

 

There is no extra cost to the bank associated with paying an item that exceeds the overdraft limit. There is no cost to the bank associated with exceeding your limit, except maybe 50p for a letter. Standard interest rates of around 15% on an overdraft are already in excess of 3x base rate.

 

Interest rates on borrowings (all kinds) should be capped at base rate plus 7%, with a top rate of base rate plus 10% for unauthorised borrowing by law.

[Guest NATTIE]

If the transgression is return DD £2.00, and that goes over the overdraft, surely that's a 2nd transgression so £2.00 levied per charging period. It's a tough one to judge.

 

I throw something else into the mix which is inter related. Some people use their card until it is declined but some retailers have a floor limit, that is when the transactions will be authorised without checking if funds are available. So for example if a shop has a floor limit of £5.00 then even if there are no funds available the transaction will be authorised.

 

Surely, we're back to financial responsibilty of the individual.

[thewifeandI]

I can't see a reason to charge for being over the limit - it might be a transgression, but there's no cost involved to the bank. The higher rate interest charges automatically kick in (have all banks reduced them to only being applied to the overlimit amount yet?) and make more money for the bank for doing what banks do - lending money. There is only one reason for the overlimit charge - greed!

 

If the overlimit is caused by the bank allowing a payment through when they didn't have to, or worse still, caused by bank charges, then no other charge should apply to the transgression.

[alanfromderby]

To be fair, there would be a cost if a letter was sent out informing you of the overlimit.

 

I would also agree with NWSM, in that a charge (at the correct level) would be correct for card misuse, again if this involved the sending out of a letter.

[thewifeandI]

To be fair, there would be a cost if a letter was sent out informing you of the overlimit.

 

I would also agree with NWSM, in that a charge (at the correct level) would be correct for card misuse, again if this involved the sending out of a letter.

As my 'letters', automatically generated and signed by a computer, are then stored on disc whilst an email is sent out to me to alert me to its presence I can say that the total cost is a near 0p as makes no odds.

 

If your letter, automatically generated and signed by a computer, is then collated, folded and stuffed into an envelope which is put into a mailsorted sack for RM to collect, then the cost will not exceed 50p per item, including depreciation on the plant.

 

Don't get me wrong, I'm all for the bank recovering their costs, as long as those costs are the TRUE costs and not some figure plucked out of thin air.

[alanfromderby]

As my 'letters', automatically generated and signed by a computer, are then stored on disc whilst an email is sent out to me to alert me to its presence I can say that the total cost is a near 0p as makes no odds.

 

If your letter, automatically generated and signed by a computer, is then collated, folded and stuffed into an envelope which is put into a mailsorted sack for RM to collect, then the cost will not exceed 50p per item, including depreciation on the plant.

 

Don't get me wrong, I'm all for the bank recovering their costs, as long as those costs are the TRUE costs and not some figure plucked out of thin air.

 

Yes, that is exactly what I said earlier in the thread - and what is in the OFT report!

[hagenuk]

As my 'letters', automatically generated and signed by a computer, are then stored on disc whilst an email is sent out to me to alert me to its presence I can say that the total cost is a near 0p as makes no odds.

 

If your letter, automatically generated and signed by a computer, is then collated, folded and stuffed into an envelope which is put into a mailsorted sack for RM to collect, then the cost will not exceed 50p per item, including depreciation on the plant.

 

Don't get me wrong, I'm all for the bank recovering their costs, as long as those costs are the TRUE costs and not some figure plucked out of thin air.

Around ten years ago I worked for a company that used to print, stuff and sort statements, bills, invoices etc (not for the banks but for telco's and other companies with a larger customer base) and we used to charge £11.60 per thousand for printing and stuffing. The paper was £3.16 per thousand and the envelopes £13.16 per thousand, total £27.92 per thousand. These are actual figures from a customer who used us for around 20,000 pages per month so in fact the costs are somewhat higher as this was considered a small customer.

 

The £11.60 per thousand was a "service charge" that included receiving the customer data in an agreed format (disk, tape, optical etc.) formatting, collating, merging and printing. The printing was done on IBM laser printers capable of printing 140 sheets per minute and the sorting and stuffing was done using KERN multi-mailers that could sort, stuff and seal 7000 envelopes per hour.

 

As I mentioned, these costs were for what was considered a small customer so the prices were not as keen as they could be yet still the cost per finished envelope was less than 3p!

 

Postage was extra depending on how the customer wanted it sending but was at Royal Mail published rates.

 

I suggest it is also safe to assume that this process has become easier and therefore cheaper as technology in this area has advanced in the last ten years.

[ann1982]

I apologise if this seems pedantic, but as I'm sure you're aware that different banks charge different amounts, would the charge be fair if it went up, I'm sorry if this sounds silly but for example, if the electricty bill goes up.

I guess what I'm getting at is how is a fair charge could be calculated? Reason being that under contract law it is between one person and the Bank. Now say a bank has 3 million customers(I know most high street banks have more). Would that cost be lower than say a Building society who would have lower costs?

 

natwest have to be worst for bank charges. im due to start a claim to get back over £2000. i wont give up until ive got it. natwest is a disgrace and i would not recommend them to anyone.

[thewifeandI]

To be fair Ann, you'll be hard pressed to find a bank that is any better or worse than any of the others when it comes to charges and their reactions when asked for help. It's very much a situation where they've got control over your money and there's very little that you can do about it other than switch to a cash only basis!

[Guest NATTIE]

Just quickly going back to checking at the atm.

Karnevil- I agree to a point but if you as an individual are knowledgeable about banking(I'm not saying the opposite is the case), you would know that a cheque is calid for 6 months from the date of issue, and if not cashed then technically you have entered into a contract with shop/ company/ individual that it is funds available to you. The advice I have always given to people is not to destroy switchreceipts until they have cleared your account. So if I have £40 for example and I use £20.00 for switch and I check the balance immediately and it says I still have £40 surely I don't take out more than £20.

I'm not saying the charges are fair but financial knowledge is key to avoiding bank charges.

[hagenuk]

Just quickly going back to checking at the atm.

Karnevil- I agree to a point but if you as an individual are knowledgeable about banking(I'm not saying the opposite is the case), you would know that a cheque is calid for 6 months from the date of issue, and if not cashed then technically you have entered into a contract with shop/ company/ individual that it is funds available to you. The advice I have always given to people is not to destroy switchreceipts until they have cleared your account. So if I have £40 for example and I use £20.00 for switch and I check the balance immediately and it says I still have £40 surely I don't take out more than £20.

I'm not saying the charges are fair but financial knowledge is key to avoiding bank charges.

 

If only it were that simple then nobody would get charged, ever. But its not that simple and the banks deliberately exploit that fact. Not many of us have the time to constantly check our balances and simple errors are, by definition, easy to make and suddenly we are stung for charges that can quickly add up to hundreds of pounds.

 

An example. My wife cancelled three direct debits. Two are accepted but for some reason the third, for £85 gets paid. She writes a cheque for £17 which bounces. £38 charge. It gets represented and bounces again, a second £38 charge. Due to the £161 that is now missing from her account (2 x £38 and the original £85) a cheque for £414 is returned, again twice and again another £76 in charges is debited along with £28 for an unauthorised overdraft. So in the space of a few weeks £265 has been taken and two cheques have been unpaid.

 

In this instance we were able to recover it all due to the DD guarantee, but not without having to quote it verbatim to the manager, as the bank protested at first that it was not their fault and we would have to contact the DD originator to reclaim the £85 DD that was erroneously paid!

 

Now this was a bank error and we caught them red-handed so to speak but how many times has this happened and gone unnoticed? How many times have the banks attempted to pay things the day before, sometimes even hours before they know salaries get paid in? I do not expect you to condone much less admit this practice but we know it goes on. I know of a guy who got paid weekly, had worked at the same firm for over 20 years and banked with the same bank. You'd think they would know when he got paid, yet regular as clockwork, every Thursday he'd get a slew of returned items and he got paid on Friday. He was constantly battling to keep afloat. His account was suspiciously devoid of activity until the day before payday, funny that.

[Guest NATTIE]

Hegenuk- i hope to cover all points you make, I agree with you that if everything was that simple no one would be charged. I remember once an american national who had a booklet supplied by the bank(and still available) in which they would write their own balance down and would write the transactions that they made so that they knew the realistic balance of their account.

With cheques, they can be returned twice. The first response on a cheque can be "return to drawer please represent" that means that it is returned to the issuing bank and represented which could be returned once more or twicefor 1 cheque with a response of "refer to drawer" which should stop the cheque being presented again.

Your point about salaries being paid in regular assumes a Big Brother type of banking in which because a salary is paid in every week the bank will know it is there a day before it is due in. What if a person is sacked/made redundant? That would mean no money may be paid in on the following day. Banks unfortunately do not have a magic ball. Payments can be recalled even on the day that they are paid in.

[noobrider]

I agree that the banks don't have the fore sight to possibly downfalls such as you becoming redundant, however that does not explain Abbey's policy of administering charges. having read other users comments it appears that there is no fixed date that charges are applied to an account, which logically would seem to be the most sensible soloution. What does appear to happen is that charges are applied to accounts at the most inconvenient time for a customer. For example...I am paid on the 30th or 31st of every month, however my charges are always applied on the 27th of the month...that I could accept if it was a standard date for applying charges and I would accept i was just unlucky with the date I get paid. However, my wife gets paid on the 27th of the month and has her own account where the charges for that are taken out on the 24th of every month.....explain that? this is just 2 instances if you read through the forums or did a running check you would find that bank charges are applied on a variety of days throughout the month all 3 to 4 days before you actually get paid. Try argue that they are not engineered to cause maximum damage to your account.

[Guest NATTIE]

Read the fees brochure for your bank is how i explain it. The bank I work for(I think you can guess from the name), clearly set out charges. Chqs returned, DD/SO's are charged immediately(that is when the systems are updated on each working day), Card misuse within a day or two. I do argue that the charges are not arbitrarily enforced. As with Bank charges they are set. Unnarranged Borrowing charges are pre advised with the date when they are to be debited.

I haven't read how fees are levelled at Abbey but it may be worth getting their leaflet re charges to see how it is applied.